SIE Exam Question 932: Answer and Explanation

Question: 932

Which of the following is a measure of the timing of cash flows (i.e., the interest payments and the principal repayment) to be received from a fixed income security? It's used to assess price volatility for changes in interest rates and the reinvestment risk associated with a portfolio.

• A. Convexity
• B. Duration
• C. Term
• D. Yield

Correct Answer: B

Explanation:

Duration is a measure of the timing of cash flows (i.e., the interest payments and the principal repayment) to be received from a fixed income security. It's used to assess price volatility for changes in interest rates and the reinvestment risk associated with a portfolio.