- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 46. Understanding Fixed-Income Risk and Return
- Subject 2. Macaulay, Modified and Effective Durations
CFA Practice Question
The best duration measure for a mortgage-backed bond is ______.
B. Modified duration
C. Effective duration
A. Macaulay duration
B. Modified duration
C. Effective duration
Correct Answer: C
A mortgage-backed bond is actually a bond with embedded call options.
User Contributed Comments 4
| User | Comment |
|---|---|
| HolzGe1 | Because of possible prepayments. |
| adidasler | or refinancing |
| ashish100 | nice thanks guys! |
| Kiniry | refinancing=prepayments |