Immunization of a portfolio implies that changes in _____ will not affect the value of the portfolio.
A)book value of assets
B)maturity
C)market prices
D)interest rates

Question

Quizplus · Accepted Answer

Immunization is a technique used to protect a bond portfolio against interest rate risk. It involves matching the duration of the portfolio to the investment horizon and keeping the portfolio's modified duration zero. This means that changes in interest rates will not affect the value of the portfolio. Therefore, immunization implies that changes in interest rates will not affect the value of the portfolio, and D is the best choice. The book value of assets, maturity, and market prices can all affect the value of the portfolio even if it is immunized against interest rate risk.

Immunization of a Portfolio Implies That Changes in _____ Will