- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 7. Valuation and Analysis of Capped and Floored Floating-Rate Bonds
CFA Practice Question
Which bond is most likely the ideal instrument for an investor in a rising interest rate scenario?
B. a capped floater
C. a floored floater
A. a fixed-coupon bond
B. a capped floater
C. a floored floater
Correct Answer: C
A fixed-coupon bond is not recommendable because its price will fall. A capped floater will cap the coupon rate so it is not idea either.
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