Why is an investor concerned with how the investment characteristics of a market-cap-weighted bond index can change over time?
What will be an ideal response?
Investors desire a bond fund that is geared towards meeting their investment needs. Once they buy into this fund, they want its characteristics to remain the same given that their investment needs are unchanged. Characteristics that they want constancy with include cash flow, book-to-value ratio, dividend per share, sales growth, and the like. If the bond fund is tied to an index such as a market-cap-weighted bond index with characteristicsthat mirror their investment needs, they do not want that bond index to consist of bonds where its characteristics are changing.
You might also like to view...
To achieve positive OB, an organization must pursue the key contributors of distributive justice, temperance, and virtuous leadership.
a. true b. false
Preferred stockholders
A) have voting rights. B) have a residual claim on assets. C) have original selling prices and par value the same. D) must receive a dividend.