Bond portfolio immunisation techniques balance ________ and ________ risk.

Question

Quizplus · Accepted Answer

Bond portfolio immunisation techniques aim to balance price risk with reinvestment risk. Price risk refers to the potential for changes in interest rates to cause fluctuations in the value of the bond portfolio, while reinvestment risk refers to the uncertainty about the future interest rates at which the cash flows from the bond portfolio can be reinvested. By balancing these two risks, investors can ensure that the bond portfolio will meet their future cash flow needs regardless of changes in interest rates. Choice A correctly identifies price and reinvestment risk as the two risks that need to be balanced. Choices B, C, and D are incorrect because they identify other risks that are not directly relevant to bond portfolio immunisation techniques.

Bond Portfolio Immunisation Techniques Balance ________ and ________ Risk

Bond Portfolio Immunisation Techniques Balance and Risk