Dave, a conservative investor, comes
to you for advice on a diversified fixed-income portfolio.
He wants to live off the interest generated from the
bond investments, in which he needs 6% per year. Dave
is afraid that interest rates might be on the rise.
All of the following should be considered when buying
the bonds EXCEPT:
a) Maturity of the bonds
b) Coupon rate
d) Quality of the issue
The correct answer is c:
When setting up a diversified bond portfolio you should
consider the following factors- maturity, taxes (location
of the issuer), coupon, quality, and the current interest
rate environment, to name a few considerations. The
debt-to-equity of the issuer is typically not a primary