Did CFAI change the text since 2010 or are we supposed to know this stuff? Now that I have seen the answer, I can work it through, but I never saw it handled this way in the book. Also, there are two ways of developing an immunized portfolio?
Could you post the Q, I don’t have the stuff here at work.
Are you talking about the rebalancing ratio problem? You can use both a controlling position, or even purchase of all bonds in portfolio.
this is the question about finding out which bond is the right purchase.
use the Total Requirement’s $Duration - ($Duration of Bonds already present) to reach the $Duration of Bond needed.
Use the Total Requirement - (Bonds Market value) = Bond Market Value needed.
Arrive at the Duration # based on the above two.
and decide which bond is the best one to pick.
I remember this one, it was tricky.
I don’t think controlling postion is any longer there in the 2012 LOS?
Controlling Position is mentioned in the reading as a heading title, but no content thereafter.
Agree with cpk123, it is just an extention to the dollar duration management. It is not beyond the LOS.
There’s nothing fundamentally different at a base level – and given enough time one could figure out which bond to add to construct an immunized portfolio. That kind of problem does not apear in the 2012 text. And we are not given an opportunity to prepare for and practice it.
I hope we don’t have to confront problem sets for which we had no opportunity to prepare.
I can assure you they will ask questions in a non-“normal” manner on more than one occasion. Level 3 is much more trickery than the other two were.
atleast 1 or 2 odd question is expected in 2012 AM…