CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

If interest rates goes down, which embedded option will benefit bondholders?

A. call options
B. put options
C. extension options
Correct Answer: C

In this case bondholders can choose to keep the bond for a number of years after maturity. This relatively rare type of bond works to the advantage of investors during periods of declining interest rates.

User Contributed Comments 1

User Comment
connor15 Investors purchase extendable bonds in order to take advantage of changing interest rates without assuming the risk involved with a long-term bond.
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