What Are the Two Components of Interest-Rate Risk? How Do

question 32

Essay

What are the two components of interest-rate risk? How do they work to immunize a portfolio?

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Definitions:

Crop

Cultivated plants or agricultural produce, such as grain, vegetables, or fruit, considered as a group.

Risk Profile

An evaluation of an individual's or organization's willingness to take risks, as well as their financial capacity to bear risk.

Financial Risk

The potential for financial losses due to factors affecting an entire market or security, including market risk, credit risk, and liquidity risk.

Price Fluctuations

Variations in the prices of goods and services over time, which can be influenced by factors like supply and demand, inflation, and market sentiment.