Explain the concept of bond immunization and the benefits derived from using this technique
What will be an ideal response?
Answer: Bond immunization is based on the offsetting reactions of bond prices and the reinvestment of interest payments. These reactions are in response to interest rate changes. Immunization is achieved when these two forces equally offset each other. The primary benefit of immunization is the ability of an investor to earn a specified rate of return on a bond portfolio regardless of what happens to market interest rates over the course of the holding period.
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Innovators are highly averse to risk and are extremely conservative
Indicate whether the statement is true or false