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.  Interest rate sensitivity  is a measure of how much the price of a fixed-income asset will fluctuate as a result of  changes  in the  interest rate  environment.

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