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Basic Question 3 of 5
Modified convexity is different from effective convexity because:
B. the yield changes produce cash flow changes in modified convexity but not in effective convexity
C. effective convexity assumes that cash flows change as yields changes but modified convexity does not
D. although calculated differently, the two will always have the same convexity
A. the cash flows of modified convexity are always changing but this is not true for effective convexity
B. the yield changes produce cash flow changes in modified convexity but not in effective convexity
C. effective convexity assumes that cash flows change as yields changes but modified convexity does not
D. although calculated differently, the two will always have the same convexity
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I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
compare effective convexities of callable, putable, and straight bonds;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.