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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 happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach
Learning Outcome Statements
compare effective convexities of callable, putable, and straight bonds;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.