- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 31. Credit Analysis Models
- Subject 4. Valuing Risky Bonds in an Arbitrage-Free Framework
CFA Practice Question
A change in the assumed interest rate volatility can cause the change in the fair value of a corporate bond when:
II. there are embedded options.
III. there is credit risk.
I. there are coupons.
II. there are embedded options.
III. there is credit risk.
Correct Answer: II and III
Regarding credit risk, there is a small impact of interest rate volatility on the fair value of the corporate bond, as illustrated in the reading.
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