CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

Which factor is most likely the change in the yield curve level?

A. Factor 1
B. Factor 2
C. Factor 3
Correct Answer: A

It shows for a one standard deviation positive change in that factor, the yield for a 0.25-year bond would decline by 0.2089%, a 0.50-year bond by 0.2199%, and so on across maturities, so that a 30-year bond would decline by 0.3102%. It describes approximately parallel shifts up and down the entire length of the yield curve.

User Contributed Comments 2

User Comment
ashish100 Wtf wish they'd explain this better. AN please explain 100 dollars don't grow on trees brah
davidt87 ashish100 i'm hating this section too.

i guessed it because i assume a change in level of the curve will impact each rate in the same direction, and all of Factor 1 values were negative.

Factor 2 appears to be steepness as you can see the shorter term rates are positive while the longer terms are negative - if you imagine how that would change a graph I think it would flatten it

Factor 3 appears to be curvature because the middle is sinking and the short/long term values are positive

Disclaimer: i have no fcking clue whats going on in this reading
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