Research Has Shown That the Asset Allocation Decision Explains ____

question 3

Multiple Choice

Research has shown that the asset allocation decision explains ____% of the variation in fund returns across all funds,and ____% of the variation in returns for a particular fund over time.

• A) 90 and 100.
• B) 100 and 40.
• C) 90 and 40.
• D) 40 and 100.
• E) 40 and 90.

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates.

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including all payments of principal and interest.

Immunization

A strategy that matches durations of assets and liabilities so as to make net worth unaffected by interest rate movements.

Interest-Rate Risk

The potential for investment losses due to fluctuations in interest rates, affecting particularly fixed-income securities.