Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 15 of 15
Which of the following statements is least accurate with respect to the price volatility characteristics for putable bonds?
B. At yield levels above that of the coupon rate, putable bonds become extremely sensitive to small changes in yield.
C. The price of a putable bond can never become lower than the price of an equivalent non-putable bond.
D. For low levels of yield, the price volatility characteristics of a putable bond will mirror that of an equivalent non-putable bond.
A. The yield on a non-putable bond can never become higher than the yield of an equivalent non-putable bond.
B. At yield levels above that of the coupon rate, putable bonds become extremely sensitive to small changes in yield.
C. The price of a putable bond can never become lower than the price of an equivalent non-putable bond.
D. For low levels of yield, the price volatility characteristics of a putable bond will mirror that of an equivalent non-putable bond.
User Contributed Comments 4
| User | Comment |
|---|---|
| steved333 | why would a putable bond be cheaper than its non-putable counterpart? |
| steved333 | oh I see. LEAST accurate... |
| Richie188 | exercise price for a putable bond is normally the par value. as the yield goes above the coupon rate, the price of the putable bond gets very close to the exercise price and becomes insensitive to further yield changes. |
| johntan1979 | Picturing the graph will help eliminate C and D instantly, and A is to test our intelligence. Non-putable vs non-putable... nice try |
Thanks again for your wonderful site ... it definitely made the difference.
Craig Baugh
Learning Outcome Statements
explain how interest rate volatility affects the value of a callable or putable bond;
explain how changes in the level and shape of the yield curve affect the value of a callable or putable bond;
calculate the value of a callable or putable bond from an interest rate tree;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.