true or false 1. “I understand that forward interest rates represent a breakeven rate within markets, not across market.” 2. “Forward rates can be used to derive the strategic bond allocation by increasing exposure to markets where the expected bond yield is farthest above the forward yield.”
- true 2. false
green360, can u explain why?
- Don’t understand what within-markets and across-markets mean, so no idea. 2) I think this would be true? If expected bond yield is farthest above the forward rate, then due to mean-reversion, it will fall and thus increase the price of the bond. Therefore, more allocation to the bond holdings? fml.
FML indeed. I have no idea.