A portfolio is said to be immunized if:
A) the present value of its cash flows equals its principal value.
B) the duration of the portfolio is equal to its maturity.
C) the present value of its cash flows is greater than its principal value.
D) the duration of the portfolio is equal to the investor's investment horizon.

Question

Quizplus · Accepted Answer

A portfolio is immunized when its duration matches the investor's investment horizon, minimizing interest rate risk and ensuring that the portfolio's value is protected against changes in interest rates.

A Portfolio Is Said to Be Immunized If