Pavonia Case Scenario

This question was on the CAFI mock am. I do not understand why does measurement error occur while liquidity don’t?

Is Adams is most likely correct in her assessment of measurement error?

  1. Yes
  2. No, because passive management would preclude measurement error
  3. No, because asset liquidity risk is greater than the risk of measurement error

A is correct. Measurement error for Asset BPV can arise even in the classic passive immunization strategy for Type I cash flows, which have set amounts and dates. Asset liquidity can become a risk factor in strategies that add active investing to otherwise passive fixed-income portfolios and would not be applicable here.

yeah good point, me neither…

what number is this

Q 33

Same here

Did anyone figure this out?