- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 13. Curve-Based and Empirical Fixed-Income Risk Measures
- Subject 1. Curve-Based Interest Rate Risk Measures
CFA Practice Question
The Macaulay duration is ______ the modified duration in estimating duration for bonds with embedded options ______.
B. superior to; it does consider changing cash flows
C. equal to; because they both consider changing cash flows
D. equal to; because neither consider changing cash flows
A. weaker than; it does not consider changing cash flows
B. superior to; it does consider changing cash flows
C. equal to; because they both consider changing cash flows
D. equal to; because neither consider changing cash flows
Correct Answer: D
User Contributed Comments 7
| User | Comment |
|---|---|
| harpalani | Why D? |
| johntan1979 | Why this why that... read the notes, dude. |
| enetis | burn |
| dojoe | rude |
| dbedford | D because Macaulay and Modified operate around a fixed idea of CF. |
| sshetty2 | see effective duration |
| thevinu | Effective duration is for bonds with embedded options, Macaulay and Modified are for option-free bonds. |