Fixed Income Portfolio Management - Chesapeake

CFA Level III Fixed Income
#1

Question 3

Why equaling YTM and target yield (target value) doesn’t assure target value will be achieved ? (immunization)

Is it because interest rate keeps changing until you reach liability date and that exposes CFs to reinvestment risk?

Is key rate duration matching involved here in this question?

Please elaborate more on this, i know i am not able to connect dots.

#2

which reading and which book?

#3

Yes.

If the reinvestment rate is lower than the YTM, the realized yield will be lower than the YTM; if the reinvestment rate is higher than the YTM, the realized yield will be higher than the YTM. As normal yield curve slope upward, the former is more likely than the latter.

You probably recall this from Level I.

#4

yes