CFA Practice Question

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CFA Practice Question

The stated annual yield-to-maturity on a semi-annual bond basis is 4.96%. If you convert it to a periodicity of four, the annual yield-to-maturity will be ______ 4.96%.

A. lower than
B. equal to
C. higher than
Correct Answer: A

Compounding more frequently at a lower annual rate corresponds to compounding less frequently at a higher annual rate.

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