SIE practice questionhardDuration and Convexity
An investor wants to minimize the impact of interest rate changes on the value of their bond portfolio. They should primarily consider the bonds’:
- ADuration✓ Correct answer
- BCurrent yield
- CMoody’s rating
- DCoupon frequency
Explanation
Why A — Duration
Duration measures a bond’s sensitivity to interest rate changes. Current yield and coupon frequency do not measure price risk; Moody’s rating is about credit risk, not interest rate risk.
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