The Practical Application of Bond Portfolio Immunization to Investors Is

question 28

Multiple Choice

The practical application of bond portfolio immunization to investors is that immunization

• A) allows aggressive traders to eliminate the price effects caused by interest rate changes.
• B) allows investors to derive a specified rate of return from bond investments for a given investment horizon.
• C) eliminates the possibility of losing money due to a company defaulting on its bond payments.
• D) allows investors to passively manage their bond portfolio once it is initially immunized.

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Definitions:

Hourly Rate

The amount of money paid for one hour of work.

Expected Value

The predicted value of a variable, calculated as the sum of all possible values each multiplied by the probability of its occurrence.

Salary Increase

The process of raising an employee's pay rate, typically as recognition for job performance, inflation adjustments, or promotion.

Probability

A quantitative assessment of an event's chances of happening, with values from 0 to 1 indicating the likelihood.