CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

The higher the interest rate volatility, the ______ the value of the callable bond and the ______ the value of the putable bond.
A. higher, higher
B. lower, higher
C. higher, lower
Explanation: The value of any embedded option, regardless of the type of option, increases with intreest rate volatility.

Value of callable bond = Value of straight bond - value of call option
Value of putable bond = Value of straight bond + value of put option

User Contributed Comments 0

You need to log in first to add your comment.