allocation: Domestic equity 50% +/- 5% International equities 15% +/-1.5% Domestic bonds 35%+/-3.5% Evaluate the implications of the following sets of facts on the stated tolerance band, given an all-else-equal assumption in each case: Domestic bond volatility is much lower than that of domestic or international equities, which are equal. Tolerance band for domestic bonds Solution: Wider I do not get this, can some one please explain? I bet it can be argued as “the higher the vol of the rest of the portfolio, the narrower the corrider”. Would appreciate some thoughts on this.
Domestic bonds volatility decreasing --> its band increases (everything else equal)
elcfa Wrote: ------------------------------------------------------- > Domestic bonds volatility decreasing --> its band > increases (everything else equal) thanks. Don’t understand why I thought that is an issue last night. But it does show that even if I know the material, when actually doing the problems, I can still get confused at times…