- 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
All else being equal, the value of a put option is the highest if the yield curve is:
B. flat.
C. downward sloping.
A. upward sloping.
B. flat.
C. downward sloping.
Correct Answer: A
The value of a put option decreases as the yield curve flattens. This is because the number of opportunities for the investor to put the bond declines.
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