- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 13. Curve-Based and Empirical Fixed-Income Risk Measures
- Subject 2. Key-Rate Durations
CFA Practice Question
If the effective duration of portfolio A is the same as that of portfolio B, the performance of the two portfolios ______ for a small ______ shift in the spot rates.
II. may be the same, parallel
III. may not be the same, nonparallel
I. may not be the same, parallel
II. may be the same, parallel
III. may not be the same, nonparallel
Correct Answer: II and III
As they have the same duration, their performance should be identical for a small parallel shift in the spot rates. However, they may have different key rate durations so we cannot say their performance change is still the same for a small nonparallel shift in the spot rates.
User Contributed Comments 2
| User | Comment |
|---|---|
| ryanpetty | The key rate duration allows for changes in the level, slope and shape of the yield curve. |
| davidt87 | i get the point, but the logic is all screwed in this question. if they "may" be the same, it stands to reason that they may also not be the same |