increased change in value that occurs because longer maturity investments are affected more by interest rate changes than are shorter maturity investments is called Blank______ risk. Multiple choice question. maturity interest rate reinvestment rate default

Q: Adding alternative investments to a traditional portfolio can increase expected returns and reduce…

A: There are certain types of things which are under the control of the business or any person like by…

Q: An inflation hedge is an asset that increases in value at a rate equal to or greater than the rate…

A: Hedging is technique of reducing risk. This reduction in risk also results typically in a decrease…

Q: If the risk-free return were 4.0% and a security's beta coefficient were 2.0, what would be the…

A: Security Market Line: It is a line representing a graphical representation of CAPM (capital asset…

Q: The risk-free rate of return can be thought of as consisting of ____ and ____.   a. unanticipated…

A: The theoretical rate of return for an investment with no risk is known as the risk-free rate of…

Q: Part A: Choose the correct option for each question (investments) A) increased, increased B)…

A: A loan is money borrowed from an outsider in case of need. A loan comes with a cost that is called…

Q: An upward-sloping yield curve

A: An upward sloping yield curve: may reflect the confounding of the liquidity premium with interest…

Q: The goal of immunization is to A. make the effective duration of the portfolio zero В. generate a…

A: Portfolio immunization is a strategy that matches the duration of assets and liabilities to mitigate…

Q: Is default risk premium likely to be pro-cyclical (i.e., increasing during economic expansion) or…

A: The difference between the company's actual interest rate and risk free rate within the industry is…

Q: A disadvantage of holding TIPS is A If inflation does not occur then the value of holding TIPS…

A: Several statements have been given as disadvantages of TIPS. We have to find the correct one.

Q: p of answer choices Both theories assume that undiversifiable risk is priced. Both theories assume…

A: Step 1 APT aims to identify the market value of the collateral that may temporarily have a negative…

Q: For the holder of a fixed-rate coupon bond, reinvestment risk is a bigger problem during a period of…

A: Fixed rate bonds are a type of bond which pays a fixed periodic coupon calculated on the face value…

Q: If the inflation rate is positive, the expected NPV of an investment will be:  A.understated if real…

A: The nominal discount rate will be reflection of the combination of real interest rate and the rate…

Q: Explain how alternative investments can act as a hedge against inflation.

A: Alternative Investments:  Stocks, bonds are financial instruments that fall under the category of a…

Q: Default risk refers to the value a bond investor will lose if the issuer defaults. It as a…

A: Risk is defined in monetary terms as the possibility that the actual return from a result or…

Q: Which of the following investment has the lowest EE savings bonds. Money market savings accounts.…

A: Money is saved for the future requirements based on the need and objective of savings and it depends…

Q: K possible Risk-Free Rate. What is a risk-free rate? Give an example of an investment with a risk…

A: Please refer below page.If you have any questions feel free to ask.Explanation:

Q: 13. Securities with less predictable prices and have longer maturity time is considered as _____. A.…

A: Securities refer to the capital market instruments that facilitate the flow of money in the market…

Q: Goodyear, a U.S. firm, sells tires to Airbus UK, and will receive payment of £1,000,000 in one year.…

A: With globalisation and increasing demand of services and products, firms operates businesses…

Q: Whether the following statement is true or wrong. Briefly explain your answer. "It is impossible to…

A: The asset which has no risk associated with it is known as risk free asset. The return from risk…

Q: As one adds more assets to a portfolio in order to achieve diversification, the portfolio's risk? O…

A: Diversification is a process in which investors add more assets which are not well correlated to…

Q: nvestors choose deri tives

A: derivatives are financial instruments whose value is derived from an underlying asset such as bonds…

Q: FINANCIAL RISK MANAGEMENT  1. Duration is a measure of interest rates risk. (True/ False) 2. Bond…

A: The answers and explanations are provided below:

Q: The normal yield curve states that long-term investors are compensated for which risk? A Maturity…

A: A normal yield curve is upward sloping. We need to find out compensation towards which risk,…

Q: Given a decrease in interest rates, Mortgage-Backed Securities (MBS) prepayments will be slower…

A: Mortgage-backed security refers to securitized bonds backed by different types of mortgages, and the…

Q: What is the mispricing if an Equity Premium exists? Should more bonds or more equity be added to a…

A: Let's revisit the Equity Premium Puzzle (EPP) and explore its implications without any external…

Q: An increase in investor risk aversion would be expected to: Increase the Risk-Free Rate while…

A: We have to assess the impact of the increase in risk aversion on risk free rate and expected return…

Q: Let rf be the risk free rate of interest. E[r e ] be the expected return of some risky asset.…

A: CAPM: CAPM is also called as Capital assets pricing model. Factors affecting CAPM return are risk…

Q: The following figures illustrate which theory concerning interest rates? Yield to Maturity Time to…

A: The Liquidity premium theory states that long term interest rates include a premium for holding long…

Q: Classify each of the following in terms of its effect on interest rates (increase or decrease): I.…

A: Interest ratesInterest rate is referred to as the amount a lender charges to a borrower and is a…