4. Fixed Income

Interest Rate Risk — Quiz

Test your understanding of interest rate risk with 5 practice questions.

Practice Questions

Question 1

Which of the following factors is inversely related to a bond's duration, assuming other factors remain constant?

Question 2

What is the primary limitation of using duration as a measure of interest rate sensitivity for large interest rate changes?

Question 3

A portfolio manager wants to ensure that a bond portfolio's value at a future date is protected from interest rate fluctuations. Which strategy would be most appropriate?

Question 4

If a bond's coupon rate increases, how does this typically affect its duration, assuming yield and maturity are constant?

Question 5

Which of the following is a characteristic of a bond with positive convexity?