CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

The reason why there is a volatility impact on the fair value of an option-free corporate bond is because:

A. interest rates are spread out around the implied forward rate for each date.
B. the implied forward rates are asymmetrical.
C. liquidity and tax differences are not built in the model.
Correct Answer: B

The asymmetry in the forward rates is produced by the log-normality assumption in the interest rate model.

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