C. “MANAGING FUNDS AGAINST A BOND MARKET INDEX” (STUDY SESSION 6) A...

1. C. “Managing Funds against a Bond Market Index” (Study Session 6) a) distinguish among the following approaches to domestic bond management: 1) pure bond indexing, 2) enhanced indexing by matching primary risk factors, 3) enhanced indexing by minor risk factor mismatching, 4) active management by larger risk factor mismatches, and 5) unrestricted active management. 2006 Level III Guideline Answers Morning Session - Page 8

Question: 3 Topic: Asset Valuation – Fixed Income Valuation Minutes: 6 Guideline Answer: Template for Question 3 Determine whether Justify your response with one reason for you agree or each statement disagree with each Statement of Kennedy’s Note: Each justification can only be used statements once. (circle one) The fund is not managed properly because a pure bond indexing strategy should not Agree deviate significantly from its benchmark.