$$Fixed income investment can range from a passive investment strategy to an active

investment strategy in an attempting to seek alpha return from the bond market. Each

strategy has its own merits and demerits. However, the underlying risks associated

with a bond is the same$.$

$($a$)$ As a bond investor, critically assess the key risks to which a fixed income

instrument is exposed to$?$

$[9$ Marks$]$

$($b$)$ What is the rationale for some investors to have recourse to a passive

investment strategy?

$[5$ Marks$]$

$($c$)$ As a bond investor planning, outline four main factors you will consider prior to

a bond selection into your portfolio.

$[4$ Marks$]$

$($d$)$ Active bond management strategy is an attempt to optimize return from fixed

income investment. Critically outline the main sources of profit for a bond

management strategy as compared to a passive bond management strategy.

Support your response with relevant examples.

$[7$ Marks$]$