) BASED ON EXHIBIT 1AND STATEMENT 1, ONE DISADVANTAGE OF THE INVESTMENT STRATEGY FOLLOWED BY MONDAVI IS THAT THE PORTFOLIO WILL MOST LIKELY

2.) Based on Exhibit 1and Statement 1, one disadvantage of the investment strategy

followed by Mondavi is that the portfolio will most likely:

A.

have higher advisery and non-advisory fees.

B.

be expensive to construct.

C.

result in a poorly diversified portfolio.

Answer = B

Statement 1 indicates that Mondavi follows a full-replication approach that is pure bond

indexing. In this approach, many issues in the bond index may be illiquid and

infrequently traded. This factor makes full replication of an index not only difficult but

also expensive to implement.

“Fixed-Income Portfolio Management–Part I,” by H. Gifford Fong and Larry D. Guin