Ch.11 · Comparing Fund Performance · medium
A debt fund reports its credit quality as: AAA — 60%, AA — 25%, A — 10%, Cash — 5%. What can an investor conclude?
0% of students got this wrong
EXPLANATION
With 35% in AA and below, the fund has meaningful credit risk exposure. While not the riskiest portfolio, an investor seeking capital preservation should prefer a fund with higher AAA concentration. The portfolio will likely offer higher YTM than a pure AAA fund but with commensurately higher credit risk.
Practising Chapter 11 one question at a time?
Try the full chapter — 60 questions, tracked score, weak area breakdown.