How would you respond to the manager's suggestionabout a suitable benchmark?

What will be an ideal response?

First, it is very difficult to find a "suitable" benchmark. For example, if the benchmark is a corporate bond index with 3,000-plus bond issues, it will not be practical to hold more than 150 or so issues. This means that there will be considerable idiosyncratic risk. This risk cannot be avoided but it can be minimized using traditional credit analysis and/or credit risk models. Furthermore, the composition of the bond issues for a corporate bond index can be altered by a variety of factors including the addition of new bond and the retire of maturing bonds. As a result of the changing composition of a corporate bond index, the interest-rate risk exposure (as measured by duration and convexity) and the credit risk exposure will change. The change may be such that an investor who initially adopted a particular market-cap-weighted bond index as a benchmark because the interest-rate risk and credit risk exposure were acceptable is no longer acceptable as the composition of the index changes over time.

Business

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The ________ was established to replace GATT in 1995 and now oversees the original GATT provisions

A) WTO B) EU C) NAFTA D) CAFTA E) NATO

Business

In the MPR process, the term "expert" tends to mean a(n)

A) person whose name frequently appears in the news for one reason or another. B) celebrity who has been interviewed on NPR. C) authoritative scholar with a Ph.D. D) paid professional who possesses certain experience in one specific area. E) ordinary citizen with a strong passion for a product.

Business