Immunization works by offsetting ________ risk and ________ risk.

Question

Quizplus · Accepted Answer

Immunization is a strategy used by investors to protect against interest rate risk. It involves matching the duration of the portfolio with the investor's desired investment horizon, which offsets reinvestment risk (risk that future cash flows will have to be reinvested at lower rates) and interest rate risk (risk that interest rates will change, causing the value of bonds to fluctuate). Therefore, the correct answer is B, reinvestment risk and interest rate risk.

Immunization Works by Offsetting ________ Risk and ________ Risk

Immunization Works by Offsetting Risk and Risk