Chesapeake item set

CFA Level III Fixed Income
#1

To immunize a portfolio’s target value or target yield against a change in the market yield, a manager must invest in a bond or a bond portfolio whose (1) duration is equal to the investment horizon and (2) initial present value of all cash flows equals the present value of the future liability. Thus, investing in a bond portfolio with a yield to maturity equal to the target yield and a maturity equal to the investment horizon does not assure that the target value will be achieved because of reinvestment risk.

Is no.1 true?

#2

This "Thus, investing in a bond portfolio with a yield to maturity equal to the target yield and a maturity equal to the investment horizon does not assure that the target value will be achieved because of reinvestment risk." is incorrect. YTM equal to target yiel does not guarantee immunization. It must be: 1. D(A)=D(L) 2. PV(A)=PV(L)

#3

Yes point 1 is true, that’s classical immunization