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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 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
Learning Outcome Statements
compare effective convexities of callable, putable, and straight bonds;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.