- CFA Exams
- CFA Exam: Level II 2021
- Study Session 13. Fixed Income (2)
- Reading 34. Valuation and Analysis of Bonds with Embedded Options
- Subject 2. Relationships between the Values of a Callable or Putable Bond, Straight Bond, and Embedded Option
CFA Practice Question
Two bonds have identical characteristics, except that Bond A is opton-free and Bond B is putable at par starting in 2 years. Bond A is selling for $107 right now. The LEAST LIKELY price for Bond B is:
B. $107
C. $110
A. $103
B. $107
C. $110
Correct Answer: A
Since Bond B is a putable bond, its price should be higher.
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