CFA Practice Question

CFA Practice Question

Which of the following is most likely incorrect?
A. Convexity for a callable bond can be negative for bond yields close to the call rate.
B. Convexity for an option free bond is negative.
C. Positive convexity means that the correction that has to be added to the price change given by the duration equation is positive for both rise and fall in yields. That is, after calculating the change in price change by the duration formula, the convexity correction that should be added is positive for both rise and fall in yields.
Explanation: Convexity for an option free bond is positive.

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