CFA Practice Question

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CFA Practice Question

The best duration measure for a mortgage-backed bond is ______.

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
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