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LOS l: Compare and contrast risk minimization with return maximization in immunized portfolios.
Q1. The manager of a bond portfolio must immunize the portfolio with respect to a given set of liabilities. The manager is choosing between two immunization strategies: Strategy A and Strategy B. Strategy A has a lower return, lower risk, and a 99% probability of providing the required return to meet the given set of liabilities. The manager should choose Strategy B:
A) under no circumstances, because risk minimization is the point of immunization.
B) if that strategy’s higher risk is justified by the higher return, and the probability of meeting the liabilities is equal to or only slightly lower than that of Strategy A.
C) if that strategy’s higher risk is justified by the higher return, and only if the probability of meeting the liabilities is equal to or higher than that of Strategy A.
Q2. The manager of a bond fund is assessing several choices in attempting to immunize a portfolio to meet a lump-sum liability. If maximizing the return of the portfolio by taking on more risk with active management is the goal of the manager, then the manager should:
A) choose a portfolio with a low and positive cushion spread.
B) choose a portfolio with a high and positive cushion spread.
C) not consider immunizing the portfolio at all because maximizing return is incompatible with immunization.
Q3 .The manager of a bond fund is assessing several choices in attempting to immunize a portfolio. To meet a predetermined liability, the manager needs a five percent return. Which of the choices below would be the best in pursuit of that goal? An immunized strategy with a target return equal to:
A) 5.6% with a 95% confidence interval at +/- 50 basis points.
B) 5.2% with a 95% confidence interval at +/- 20 basis points.
C) 6.0% with a 95% confidence interval at +/- 100 basis points. | 
发表于 2009-3-6 09:10
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