2011 AM question 5a

CFA Level III
#1

In the case, it states that she is dissatisfied with the frequency of rebalancing required and the amount of transaction cost. So for the fist part of question A My advantages where 1- gives a more stable efficient frontier therefore less rebalancing. 2- since their is less rebalancing their will be less transaction costs. However the cfa guideline answer has both these reasons under one advantage. These two issues can be seen independently, no?

Also, what do you usually write down for a question that asks you to discuss? Is it the same as explain or should we go more into details?

#2

usually rebalancing is measured in terms of transaction costs - isn’t it? so both of these become the same reason.

The other reason therefore becomes “more diversified portfolio” which reduces the risk in the portfolio - and thus becomes more consistent with the investor’s lower risk tolerance, which she has expressed.

#3

The way I thought of it was, it can be measured as time spent and money spent (transaction cost) . ill just stick to the printed answers…