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    Question

    Which of the following is correct with respect to

    measurement of sensitivity?
    A This indicates the degree of risk associated with the portfolio against the changes in interest rate Correct Answer Incorrect Answer
    B It does not consider the impact of other parameters Correct Answer Incorrect Answer
    C Sensitivity is more appropriate measurement to measure impact of interest rate changes Correct Answer Incorrect Answer
    D All of the above Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Sensitivity of a portfolio indicates the degree of risk associated with the portfolio against the changes in interest rate.Ā  Interest rate sensitivity Ā is a measure of how much the price of a fixed-income asset will fluctuate as a result ofĀ  changes Ā in theĀ  interest rate Ā environment.

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