One way of eliminating both price risk and reinvestment risk is to structure a bond investment so that the duration of the bond or the bond portfolio equals:
A)the holding period.
B)the maturity period.
C)the duration period.
D)price of the bond.

Question

Quizplus · Accepted Answer

When the duration of a bond or bond portfolio equals the holding period, both price risk and reinvestment risk are minimized, as the interest rate changes will have offsetting effects on the bond's price and reinvestment of coupons.

One Way of Eliminating Both Price Risk and Reinvestment Risk