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Answer: D
Explanation:
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NEW QUESTION: 3
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Draper spoke to Peter Sterling, a colleague at Madison, about calendar rebalancing. During their conversation, Sterling made the following comments:
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Comment 2: Calendar rebalancing on an annual basis will typically minimize market impact relative to more frequent rebalancing.
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Client B is 35 years old and wants to hold stocks regardless of the value of her portfolio. She also agrees with the Madison stock market outlook.
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A. the risk tolerance for tracking error is high and the volatility of other asset classes is low.
B. the risk tolerance for tracking error is low and the volatility of other asset classes is high.
C. the risk tolerance for tracking error is high and the volatility of other asset classes is high.
Answer: A
Explanation:
Explanation/Reference:
Explanation:
A higher risk tolerance for tracking error provides more flexibility for the asset allocation relative to the target mix, and therefore a wider rebalancing corridor. If the volatility of other asset classes is high, then large differences from the target asset mix are more likely. Lower volatility reduces the likelihood of large differences, and allows for a wider corridor. (Study Session 16, LOS 46.0)
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