The goal of immunization is to A. make the effective duration of the portfolio zero В. generate a return in excess of the benchmark using factor mismatches C. earn a pre-determined return, over a specified time horizon, irrespective of interest rate changes D. provide funding of a future liability from coupon and matured principal flows

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Which of the following statements describing the elements of intrinsic valuation is most accurate?  a. A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.  b. The risk-free rate is the lowest rate that an investor can earn from short-term investments.c. When the present value of the cashflows is discounted with the appropriate rate end this present value is positive, then the asset providing these cashflows have a value to the investor. d.Cashflows may include depreciatipon expenses and amortization costs.

The constant rupee value plan requires a. Investors to fix the expected value of their portfolio b. Investors to fix their periodical installments c. Investors to fix their rebalancing points d. All of the mentioned

A project's internal rate of return (IRR) is the discount rate YTM on a bond. The equation for calculating the IRR is: timing Project A Project B 0 1 2 CFt is the expected cash flow in Period t and cash outflows are treated as negative cash flows. There must be a change in cash flow signs to calculate the IRR. The IRR equation is simply the NPV equation solved for the particular discount rate that causes NPV to equal zero 320 255 The IRR calculation assumes that cash flows are reinvested at the IRR If the IRR is greater ✔than the project's risk-adjusted cost of capital, then the project should be accepted; however, if the IRR is less than the project's risk-adjusted cost of capital, then the project should be rejected ✓✓✓. Because of the IRR reinvestment rate assumption, when mutually exclusive projects are evaluated the IRR approach can lead to conflicting results from the NPV method. Two basic conditions can lead to conflicts between NPV and IRR: ✔ differences (earlier cash flows in…

identify the assumptions underlying the interest coverage ratio appropriate measure for analyzing long-term solvency risk?  Alternatively, can you identify the assumptions underlying the interest coverage ratio appropriate measure for analyzing short-term solvency risk?

An investment requires a total return that comprises: O a real rate of return and compensation for inflation. a real rate of return, compensation for inflation, and a risk premium. compensation for inflation and a risk premium. a real rate of return, compensation for inflation, a risk premium, and compensation for time and effort devoted to researching alternative investments. None of the above

Macaulay duration is the optimal holding period to immunize the interest rate risks, namely to make the reinvestment risk and selling price risk offset one another completely. O True O False

Which one of the following is a property of a pure arbitrage portfolio?a. Negative investment.b. Zero return.c. Positive systematic risk.d. Zero total risk.

Which of the following statements is correct?     A delta-neutral portfolio is protected against large changes in the underlying asset price.     The delta hedging error increases as gamma decreases.     To change the vega of a portfolio, we need to trade the portfolio’s underlying asset.     A delta-neutral portfolio needs to be rebalanced more frequently as the gamma increases to maintain delta-neutrality.   Please explain and justify your choice using your own words.