James wants to invest in bonds and has a 10 year investment horizon.To immunize his portfolio,he must buy bonds with durations of ________ 10 years.These bonds will have maturities ________ 10 years.
A)greater than; less than
B)equal to; less than
C)less than; equal to
D)equal to; greater than

Question

Quizplus · Accepted Answer

Duration is a measure of interest rate risk. The longer the duration of a bond, the more its price will fluctuate in response to changes in interest rates. To immunize his portfolio, James must buy bonds with durations equal to his investment horizon. This will ensure that the price of his portfolio will not fluctuate significantly in response to changes in interest rates.

James Wants to Invest in Bonds and Has a 10