Dave, a conservative investor, comes to you for advice on a diversified fixed-income portfolio ...

By Investopedia Staff AAA
Q:
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
c) Debt-to-Equity
d) Quality of the issue
A:
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 concern.

RELATED FAQS

  1. An individual has started investments of $100/month into a spread-load ...

    The correct answer is b. When a periodic payment (or contractural) plan company is organized as a spread-load company, it ...
  2. Based on the Employment Retirement Income Security Act (ERISA), a retirement plan ...

    The correct answer is b. With regard to eligibility, the plan must cover all employees 21 and older who have worked for the ...
  3. The Chairman of Bright Star Life and Casual had a meeting with his broker this afternoon ...

    The correct answer is b) Insider trading would include information that is material and non-public. Certainly, a poor earnings ...
  4. Which statements about common shareholder rights are FALSE? I. A shareholder may ...

    The correct answer is a. I should be the the other way around: convertible bond holders can exchange their bonds for shares. ...
RELATED TERMS
  1. Series 79

    A examination to ensure a candidate is qualified to become a ...
  2. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  3. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  4. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  5. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
  6. Series 28

    An exam given by the Financial Industry Regulatory Authority ...

You May Also Like

Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 ...

  2. Retirement

    6 Proven Tips For Series 6 Success

  3. Insurance

    Tips For Passing The Series 6 Exam

  4. Professionals

    Banker Or Broker: Which Career Is Right ...

  5. Professionals

    Breaking Down Financial Securities Licenses

Trading Center