Margin of safety relative to market returns

[patso]

A very low margin of safety relative to the returns achievable in the market most likely results in:
A. Infrequent rebalancing
B. More rebalancing
C. No effect on rebalancing

 

[pineapple]

patso wrote:
A very low margin of safety relative to the returns achievable in the market most likely results in:
A. Infrequent rebalancing
B. More rebalancing
C. No effect on rebalancing

What page is this question from?

 

[S2000magician]

I’m not certain exactly what you mean by “margin of safety relative to the returns achievable in the market”, but, then, my Level III CFA curriculum books just arrived this afternoon.
If you can explain the term (or provide a reference), I’ll see what I can do to help.

 

[perdition]

Are these CFA Institute questions?
Or spurioulsy worded questions to guess what is actually being asked?

 

[patso]

I got the question from FinQuiz Question bank. I understand that the more the dollar safety margin the more room to play around with excess cash but I don’t understand how this affects the frequency of re-balancing. And i dont understand the answer below.
See full question and suggested answer here.

 

[broadex]

Well to me this is clear as mud. A safety net return is a minimum return before immunization ie above this return no immunization needed. Hence setting a low safety return gives you more leaway to play around before immunization or rebalancing. This is quite straight forward - i guess.

 

[Unemployed]

^ the problem that OP instead of using the exact wording of the question, used his own words reflecting how he understood it (incorrectly). Low “safety net return”, the rate below which immunization is needed, however he understood as “low margin of safety relative to the returns archivable”, which is not in the CFAI curriculum, but could mean as a curision speard, thus lower it is, more frequent rebalancing is needed.