- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 3. Fixed-Income Issuance and Trading
- Subject 2. Fixed-Income Indexes

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**CFA Practice Question**

Which is the characteristics of a broad bond index?

I. Easy to fully replicate

II. Frequent rebalancing

III. Large number of constituents.

Correct Answer: II and III

II: Bond indexes are usually rebalanced each month.

III: Some bond indexse have over 10,000 constituents.

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**User Contributed Comments**
6

User |
Comment |
---|---|

loisliu88 |
can anyone explain it for me. thanks |

Patrick15 |
the discounted payback rate will decrease the value of the returns, the payback period maintains the present value without discounting, so each payment is worth relatively more |

jonan203 |
if a $1,000 investment pays $250 every year for four years, if you discount each $250 payment by x% discount rate, you wouldn't have your $1,000 investment back in the fourth year no matter what discount rate you used. the larger the discount rate, the larger the payback period becomes |

Shaan23 |
DOes it matter if its Conventional or Non conventional? Isnt it the same for both? |

jabiller |
I believe conventional means always positive cashflow and non means there would be negative cashflows or returns. |

MathLoser |
Time value of money, guys. |