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Basic Question 5 of 14
A 8%, 30-year bond is being valued at a 4% flat yield curve with 20% interest rate volatility. The bond is putable in 10 years. Which key rate duration is the highest for this bond?
B. 10-year
C. 30-year
A. 2-year
B. 10-year
C. 30-year
User Contributed Comments 2
| User | Comment |
|---|---|
| davidt87 | if it were instead a 4% coupon bond would the answer be B? |
| CFAJ | yes because it would likely be put as soon as possible and so you should treat it like a bond with a maturity of ten years |
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
calculate and interpret effective duration of a callable or putable bond;
compare effective durations of callable, putable, and straight bonds;
describe the use of one-sided durations and key rate durations to evaluate the interest rate sensitivity of bonds with embedded options;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.