CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

Consider a zero-coupon bond. Which compounding method yields a higher compounded total return?

A. Semi-annual compounding
B. Quarterly compounding
C. Both methods yield the same compounded total return.
Correct Answer: C

Semi-annual compounding has a higher annual yield-to-maturity. However the compounded total return is the same for both semi-annual and quarterly compounding.

User Contributed Comments 5

User Comment
jorellana9 key word here is "total"
farhan92 zero coupon is also a pretty important word here
chcarnes Key word is "word"
dbedford The key word is "retake"
Sagarsan88 If zero coupon does not pay any coupon...what exactly is being compounded here?
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