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Basic Question 1 of 24

The difference between modified duration and effective duration is that ______

A. effective duration calculates the duration based on different interest rate adjustments while modified duration does not.
B. modified duration calculates the duration based on different interest rate adjustments while the effective duration does not.
C. effective duration calculates the price estimates used in duration based on the possible varying cash flows at different interest rates while the modified duration does not.
D. modified duration calculates the price estimates used in duration based on the possible varying cash flows at different interest rates while the effective duration does not.

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I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu

Edward Liu

Learning Outcome Statements

explain why effective duration and effective convexity are the most appropriate measures of interest rate risk for bonds with embedded options

calculate the percentage price change of a bond for a specified change in benchmark yield, given the bond's effective duration and convexity

CFA® 2025 Level I Curriculum, Volume 4, Module 13.