Convexity Is

question 2

Multiple Choice

Convexity is:

• A)a measure that determines how secure an investor should feel about a 'perfectly hedged' portfolio.
• B)a technique for locking in the value of a portfolio at the end of a planning horizon.
• C)a measure of the rate of change of price with respect to yield or the percentage change in price for a parallel shift in yields.
• D)the sensitivity of the hedge portfolio's yield to maturity to movements in the yield to maturity of the portfolio one is trying to hedge.

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Definitions:

Net Profit Margin Percentage

A financial metric that shows the percentage of net income generated from total revenues, indicating a company's profitability.

Year 2

Typically refers to the second year of operation, reporting, or analysis within a given context, such as fiscal years, project timelines, or investment periods.

Return On Equity

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested.

Dividend Payout Ratio

The percentage of net income that a company pays out to its shareholders as dividends, indicating how much money a company returns to shareholders versus retaining.