Suppose that you are a fixed-income portfolio manager running a fully active managed fund.Which of the following statements are true?O The duration of your portfolio matches that of a bond benchmark or index.O The aggregate credit risk of your portfolio matches that of a bond benchmark or index.Your portfolio matches the duration of a bond benchmark or index, although other factors (such assectors, quality, callability, etc.) may diverge.The aggregate interest-rate sensitivity of your portfolio matches that of a bond benchmark or index,although other factors (such as sectors, quality, callability, etc.) may diverge.None of the above statements are true.

You run a fully active managed fund as a fixed-income portfolio manager. This means that your…

Suppose that you are a fixed-income portfolio manager running a fully active managed fund. Which of the following statements are true? The duration of your portfolio matches that of a bond benchmark or index. The aggregate credit risk of your portfolio matches that of a bond benchmark or index.

Suppose that you are a fixed-income portfolio manager running a fully active managed fund. Which of the following statements are true? The duration of your portfolio matches that of a bond benchmark or index. The aggregate credit risk of your portfolio matches that of a bond benchmark or index.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Suppose that you are a fixed-income portfolio manager running a fully active managed fund.
Which of the following statements are true?
O The duration of your portfolio matches that of a bond benchmark or index.
O The aggregate credit risk of your portfolio matches that of a bond benchmark or index.
Your portfolio matches the duration of a bond benchmark or index, although other factors (such as
sectors, quality, callability, etc.) may diverge.
The aggregate interest-rate sensitivity of your portfolio matches that of a bond benchmark or index,
although other factors (such as sectors, quality, callability, etc.) may diverge.
None of the above statements are true.

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The process of bond valuation is based on the fundamental concept that the current price of a security can be determined by calculating the present value of the cash flows that the security will generate in the future. There is a consistent and predictable relationship between a bond’s coupon rate, its par value, a bondholder’s required return, and the bond’s resulting intrinsic value. Trading at a discount, trading at a premium, and trading at par refer to particular relationships between a bond’s intrinsic value and its par value. This also results from the relationship between a bond’s coupon rate and a bondholder’s required rate of return. (1) Remember, a bond’s coupon rate partially determines the interest-based return that a bond ________ pay, and a bondholder’s required return reflects the return that a bondholder (2) ___________to receive from a given investment. The mathematics of bond valuation imply a predictable relationship between the bond’s coupon rate, the bondholder’s…
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