Immunizing the net worth ratio requires that the duration of the assets be set equal to the duration of the liabilities.

Question

Quizplus · Accepted Answer

Immunizing the net worth ratio means that the value of assets should not be negatively affected by changes in interest rates. This is achieved by setting the duration of assets equal to that of liabilities. By doing so, any change in interest rates affects both assets and liabilities equally, resulting in a minimal change in net worth.

Immunizing the Net Worth Ratio Requires That the Duration of the Assets