A portfolio is exposed to interest rate increases causing a loss of capital when:
A) the average duration of assets is less than the average duration of liabilities.
B) both ZCBs and annuities are held.
C) the average duration of assets is greater than the average duration of liabilities.
D) neither ZCBs nor annuities are held.
Correct Answer:
Verified
Q17: As the term of the security increases,
Q18: 'Duration' refers to:
A) the period of time
Q19: The convexity (CX) of a ZCB is
Q20: The prices of the securities are more
Q21: The cover ratio needs to be higher
Q23: Convexity cannot be used to construct a
Q24: A 'bullet portfolio' is one where:
A) two
Q25: Modified duration is adjusted for the curvature
Q26: A perpetuity (a bond with an infinite
Q27: Which of the following is a problem
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