CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

The pricing of callable and putable bonds (given similar maturities, credit risk, etc.) tend to move in ______ directions.
A. opposite
B. the same
C. random
Explanation: This is just like the value of the embedded put or call would move. The value of a putable bond is usually higher than a straight bond as the owner pays a premium for the put feature.

User Contributed Comments 2

User Comment
janis36 The price of the bond relative to interest rates moves in the same direction for callable and puttable bonds. The options reduces the scope of the price moves.
chau76 Should be B? The interest rate movement effect on the straight bond dominates.
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