Answer the below questions. (a) What is meant by the duration problem associated with a market-cap-weighted bond
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(a) What is meant by the duration problem associated with a market-cap-weighted bond market index?
(b) Why is the duration of bond index a “historical accident”?
(c) What is meant by the bum’s problem associatedwith a market-cap-weighted bond market index?
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a At a theoretical level the justification for using a marketcapweighted bond index is provided by capital market theory According to this theory if markets are price efficient then the best way to ca...View the full answer
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