according to the text, using weekly market data will smooth the return and reduce the volatility, but text also says using high frequency data (daily) will reduce the correlation of the data, so using weekly data will have higher correlation, but according to standard deviation formula, if higher correlation, deviation will be higher, thus risk higher, can we have both high risk and low volatility? another question is for 2010 exam Q3 B, for a profitable apax baker company, not inflation adjusted. we should sell real rate bond instead of selling norminal bond, thus I prefer to choose trade D instead of trade B. because the pension is not adjusted for inflation,so why we can’t sell real bond? for existing policy holder, they also don’t need inflation protected, right? there is no indication in the article, for existing employee, we need to maintain real value.
It depends on what reading you look at, so from you posted the first argument is from SS6 and second one is from SS14. There are a lot of conflicts in the readings, its almost funny if you think about it.
can you explain the exam question (the second one) I gave. by the way, I just take previous year mock exam, they say when inflation comes, we should buy oil rather than metal(copper), but they didn’t explain why, can you explain?
Q3B - plan is profitable, has surplus, so it can afford to to take more risk. I don’t know the answer to the oil question.
No, I agree buy equity, but I’m asking comparing trade B and trade D, why we can’t sell real bond ?
linping85 Wrote: ------------------------------------------------------- > No, I agree buy equity, but I’m asking comparing > trade B and trade D, why we can’t sell real bond ? Because you want inflation protection from the real rate bonds?
reading states that energy is the best hedge against inflation
No, if you go to the question, it is clearly stated that their pension plan is not inflation adjusted, which means even current employee no need to maintain real value
linping85 Wrote: ------------------------------------------------------- > No, if you go to the question, it is clearly > stated that their pension plan is not inflation > adjusted, which means even current employee no > need to maintain real value Read the question again. They still have active employees, their salary grows over time.