The "Lockup" Problem Involved in Rebalancing Refers to the Problem

question 24

Multiple Choice

The "lockup" problem involved in rebalancing refers to the problem that:

• A) retirement accounts cannot be liquidated prior to retirement.
• B) trust accounts cannot be traded without incurring administrative costs.
• C) taxable accounts are subject to capital gains taxes if appreciated assets are sold.
• D) illiquid fixed income securities must be held until maturity.

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Definitions:

Voluntary Agreement

A consensual arrangement between parties, often formalized through a contract, without coercion or duress.

Bankruptcy

A judicial process concerning an individual or business that is incapable of paying off its accumulated debts.

Debts Reduced

A situation where the total amount owed by an individual or entity is decreased through negotiation, settlement, or by making payments.

Liability

An obligation or debt owed by an individual or company, typically financial, that arises from past transactions or actions.