CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

A bond with an embedded call option is valued at $100 and the call option is estimated to be $5, given an interest rate volatility of 20%. Now suppose the interest rate volatility drops to be 15%. What is the MOST LIKELY price of the callable bond?
A. $98.5
B. $100
C. $102
Explanation: The price of the callable bond will likely increase as the interest rate volatility goes down.

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