CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

The presence of embedded options may cause the effective convexity to be ______ while the modified duration will always be ______.

A. negative; positive
B. positive; zero
C. negative; zero
Correct Answer: A

User Contributed Comments 5

User Comment
ragingrazz This depends on the product type and the level of rates...
uberstyle how so? A is true for as stated, no?
steved333 A is true as stated.
Kevdharr Because modified duration doesn't take into account the cost of the embedded option??
CFAJ Yeah that's why modified duration will always be positive whereas effective takes options into account
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