- CFA Exams
- CFA Level I Exam
- Study Session 14. Fixed Income (1)
- Reading 44. Introduction to Fixed-Income Valuation
- Subject 2. Relationships between Bond Price and Bond Characteristics
CFA Practice Question
For a fixed-rate bond, the percentage price change is greater when the market discount rate goes down than when it goes up. This is referred to as the ______.
A. inverse effect
B. convexity effect
C. coupon effect
Explanation: Convexity: as yield increases, the price of a bond declines at a declining rate.
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