- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 3. Valuation of Default-Free Callable and Putable Bonds
CFA Practice Question
The value of a callable bond will rise if:
II. The level of interest rates declines.
III. The shape of the yield curve becomes more upward sloping.
I. The volatility of interest rates goes down.
II. The level of interest rates declines.
III. The shape of the yield curve becomes more upward sloping.
Correct Answer: I, II and III
III: The value of a call option decrease as the yield curve becomes more upward sloping. Other things being equal, the value of the callable bond will increase.
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