Answer the below questions. (a) Why does an issuer-capped bond index overcome the bums problem? (b) Does
Question:
(a) Why does an issuer-capped bond index overcome the bum’s problem?
(b) Does an issuer-capped bond index overcome the duration problem associated with a market-cap-weighted bond index?
(c) What is meant by a fundamental bond index?
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a The bums problem is the problem associated with the notion that benchmarks like a marketcapweighted bond market index are dominated by large issuers and thus have firmspecific risk related to these ...View the full answer
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