The obiective of the Asset/Liability approach to portfolio management is to.a.Understand one's liabilitiesb. Select income-producing assets that cover the interest costs of one's liabilitiesc.Model future liabilities and adopt an asset allocation strategy that is best suited to fundingthose liabilities.d.Blend a mix of active managers to generate a sufficient level of return to cover one'sliabilities.e.None of the above.

The correct answer is:

c. Model future liabilities and adopt an asset allocation strategy that is best suited to funding those liabilities.

Here are the steps to explain this:

1. Asset/Liability Approach: This approach to portfolio management involves managing investments with a focus on both the assets and the liabilities of a portfolio. It is often used by institutions like pension funds and insurance companies that have specific future payout obligations.

2. Understanding Liabilities: While understanding one's liabilities is a part of the process, it is not the main objective of the asset/liability approach.

3. Selecting Income-Producing Assets: While selecting income-producing assets can be a part of the strategy, the main objective is not just to cover the interest costs of liabilities but to meet all future payout obligations.

4. Modeling Future Liabilities: The main objective of the asset/liability approach is to model future liabilities and adopt an asset allocation strategy that is best suited to funding those liabilities. This involves forecasting the timing and amount of future payouts and then investing in assets that are expected to generate the necessary cash flows.

5. Blending Active Managers: While blending a mix of active managers can be a part of the strategy, it is not the main objective of the asset/liability approach.

So, in the context of the question, the objective of the Asset/Liability approach to portfolio management is to model future liabilities and adopt an asset allocation strategy that is best suited to funding those liabilities.