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Basic Question 0 of 4
When the yield curve is flat, which statement is true regarding a benchmark bond?
B. The par curve and spot curve are identical. Its forward rate curve will lie below them.
C. The par curve, spot curve and forward curve are identical.
A. The par curve and spot curve are identical. Its forward rate curve will lie above them.
B. The par curve and spot curve are identical. Its forward rate curve will lie below them.
C. The par curve, spot curve and forward curve are identical.
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Learning Outcome Statements
describe the process of calibrating a binomial interest rate tree to match a specific term structure;
describe the backward induction valuation methodology and calculate the value of a fixed-income instrument given its cash flow at each node;
compare pricing using the zero-coupon yield curve with pricing using an arbitrage-free binomial lattice;
CFA® 2026 Level II Curriculum, Volume 4, Module 27.