In the Evaluation of Bond Portfolio Performance,the Interest Rate Anticipation

question 41

Multiple Choice

In the evaluation of bond portfolio performance,the interest rate anticipation effect refers to

• A) The difference in portfolio duration and index duration.
• B) The extra return attributable to acquiring bonds that are temporarily mispriced relative to risk.
• C) Short-run changes in the portfolio during a specific period.
• D) The differential return from changing duration of the portfolio during a specific period.
• E) None of the above

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Definitions:

Geometric Average

A method of calculating the average rate of return that accounts for compounding, often used for investment portfolios.

Long-term

In finance, refers to investments or loans that mature in more than one year; in general use, refers to a duration extending over a long period.

Canadian Small Stocks

Equity securities of small-cap companies based in Canada, often characterized by higher volatility and growth potential than larger firms.

Risky

Involves a high degree of uncertainty and potential for loss in relation to an investment or decision.