Duration is important in bond portfolio management because I) it can be used in immunization strategies.
II) it provides a gauge of the effective average maturity of the portfolio.
III) it is related to the interest rate sensitivity of the portfolio.
IV) it is a good predictor of interest-rate changes.

Question

Quizplus · Accepted Answer

Duration is important in bond portfolio management because it can be used in immunization strategies to match the cash flows of assets with liabilities, providing protection from interest rate changes. It also provides a gauge of the effective average maturity of the portfolio, and is related to the interest rate sensitivity of the portfolio. However, while Duration can be used as an indicator or predictor of potential interest-rate changes, it is not always a reliable or accurate predictor of such changes.

Duration Is Important in Bond Portfolio Management Because I) It