Under a laddering approach, investors mitigate the effects of an interest rate increase by:
A) purchasing bonds in two maturity groups, long or short.
B) purchasing bonds with the same maturity date but with a variety of coupon rates.
C) purchasing bonds with a variety of maturity dates.
D) purchasing bonds with a variety of YTMs.

Question

Quizplus · Accepted Answer

A laddering approach involves purchasing bonds with a variety of maturity dates, which helps to spread out interest rate risk and allows for reinvestment at different times, potentially benefiting from higher rates.

Under a Laddering Approach, Investors Mitigate the Effects of an Interest