- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 2. Relationships between Bond Price and Bond Characteristics
CFA Practice Question
The price movements of option-free bonds are ______.
B. primarily characterized by the inverse relationship between required yield and price and positive convexity
C. primarily characterized by the direct relationship between required yield and price and negative convexity
A. primarily characterized by the inverse relationship between required yield and price and negative convexity
B. primarily characterized by the inverse relationship between required yield and price and positive convexity
C. primarily characterized by the direct relationship between required yield and price and negative convexity
Correct Answer: B
User Contributed Comments 2
| User | Comment |
|---|---|
| johntan1979 | Negative convexity only applies to mortgage bonds and callable bonds at low yields (likely to be called). |
| Olesya_CFA | Thanks johntan1979 |