CFA Practice Question

CFA Practice Question

'Effective duration is the same for all putable bonds, irrespective of yield to maturity, coupon or redemption date. Convexity is a means of correcting for the predictive errors inherent in duration.' Are these statements true or false respectively?
A. False, true
B. False, false
C. True, true
Explanation: Different bonds have different effective durations at different yields. Convexity is a way of adjusting for the fact that duration is not a good predictor of price change for large yield changes.

User Contributed Comments 0

You need to log in first to add your comment.