Seeing is believing!
Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.
Basic Question 10 of 24
Callable bonds exhibit ______ convexity.
B. negative
C. both A and B
A. positive
B. negative
C. both A and B
User Contributed Comments 2
| User | Comment |
|---|---|
| janglejuic | positive then negative as you see from the graph in LOS |
| GBolt93 | pretty sure you have that backwards. Low yields have negative convexity because you would call the bond and refinance at a lower rate. high yields have positive convexity like a non-callable bond because the call option is worthless since you wouldn't want to refinance the debt at a higher rate. |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
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® 2024 Level I Curriculum, Volume 4, Module 13.