CFA Practice Question

CFA Practice Question

______-adjusted duration is based on the probability that the issuing firm will buyback its callable bonds.
A. Yield
B. Risk
C. Option
Explanation: Basically understand that duration is a concept to calculate the time when a stream of payments (in the case of bonds, the coupon payments plus principal) equals a large percent of the entire value. In the case of callable bonds, there is a probability that a stream of payments may be abruptly terminated, so the duration needs to be adjusted for the probability of a firm exercising its call option.

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