CFA Practice Question

CFA Practice Question

Which of the following risks are similar?
A. Interest rate risk and yield curve risk
B. Inflation risk and volatility risk
C. Call risk and prepayment risk
Explanation: Call risk pertains to a bond being called prior to maturity by the issuer at a price below its intrinsic value due the presence of a call option. Mortgage-backed securities are exposed to prepayment of underlying mortgages when interest rates are low. Prepayment risk is similar to call risk, where the borrower calls the bond at its face value without any penalty.

User Contributed Comments 10

User Comment
dimanyc Why not A? The expectations for future interest rates directly affect yield curve, right?
shawn dimanyc: they are related to each other (one causes the other) but they are not similar.
tanyak I am going to die
meghanchloe tanyak, you are not the only one who feels like that. So much to remember, my fear is that by the time i take this test, i probably have forgotten half of what i have reviewed.
copus I think the format of the CFA 1 exam is seriously questionable. It test your ability to cram your head full of facts and formulas and does not necessarily test understanding. I am sure that one week after the exam you would have forgotten 50% of what you have learnt!
AkuK but then comes Level2 and you have to recall it all over again. :)
adamryzner agreed. The details they require you to go into are insane
mpapwa22 Hehehehe....okay you guys have made my day....CFA is the 1. Tanyak pls don't die yet, u hv to write da exam....lol
Kashi2010 Having done an MBA already I have to say that I am NOT impressed by CFA. CFA simply teaches you WHAT to think, my MBA taught me HOW to think.

The difference being that after CFA if you are presented with something you ahve never seen, you have no idea what to do, whereas the MBA taught me how to approach said problem, break it down and reconstruct an approach.

I dont want to be a human google!
leftcoast @Kashi2010 - You're saying that after you spend countless hours teaching yourself new things you've never seen before, when you are presented with something you've never seen, you won't be able to figure it out yourself?
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