In order to compare the risk properties of two bonds with different coupons and maturities a bond fund manager may use:
A) repricing gap analysis.
B) duration analysis.
C) technical analysis.
D) liability analysis.

Question

Quizplus · Accepted Answer

The most suitable tool to compare the risk properties of two bonds with different coupons and maturities is duration analysis. This method measures the interest rate sensitivity of a bond portfolio and helps the manager to assess the potential impact of fluctuations in interest rates on the bonds. Repricing gap analysis is used to quantify the interest rate sensitivity of a bank's earning assets and liabilities, and liability analysis is used to assess the suitability of the fund's liabilities and assets for its purpose. Technical analysis, on the other hand, uses historical price and volume data to make market predictions, which is not directly relevant to comparing the risk of different bonds.

In Order to Compare the Risk Properties of Two Bonds