CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

If the effective duration of portfolio A is the same as that of portfolio B, the performance of the two portfolios ______ for a small ______ shift in the spot rates.

I. may not be the same, parallel
II. may be the same, parallel
III. may not be the same, nonparallel
Correct Answer: II and III

As they have the same duration, their performance should be identical for a small parallel shift in the spot rates. However, they may have different key rate durations so we cannot say their performance change is still the same for a small nonparallel shift in the spot rates.

User Contributed Comments 2

User Comment
ryanpetty The key rate duration allows for changes in the level, slope and shape of the yield curve.
davidt87 i get the point, but the logic is all screwed in this question. if they "may" be the same, it stands to reason that they may also not be the same
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