_____ sets a target value for the bond portfolio at the horizon date that is smaller than the face value of a zero-coupon bond with the same market value as the portfolio.

Question

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The concept described in the question is known as contingent immunization. It involves setting a target value for the bond portfolio at the horizon date that is smaller than the face value of a zero-coupon bond with the same market value as the portfolio. This provides a cushion against interest rate risk and allows the portfolio manager to meet both the return objective and the safety objective. Modified duration, convexity, and MacAuley duration are all measures of a bond's sensitivity to changes in interest rates, but they do not directly relate to the concept of contingent immunization.

_____ Sets a Target Value for the Bond Portfolio at the Horizon