- 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 callable bond 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 call option increases as the yield curve moves from being upward sloping to flat, to downward sloping. If the value of the straight bond remains constant, the value of the callable bond will decrease.
User Contributed Comments 1
| User | Comment |
|---|---|
| Stoibayev | The answer seems inconclusive. |