- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 6. Fixed-Income Bond Valuation: Prices and Yields
- Subject 3. Relationships between Bond Price and Bond Characteristics
CFA Practice Question
The arbitrage-free valuation approach is different from traditional valuation because ______
II. the bond is broken into zero-coupon bonds and discounted by multiple spot rates.
III. spot rates are estimated for each cash flow maturity.
I. the bond is broken into zero-coupon bonds and a single bond rate is used.
II. the bond is broken into zero-coupon bonds and discounted by multiple spot rates.
III. spot rates are estimated for each cash flow maturity.
Correct Answer: II and III
User Contributed Comments 3
| User | Comment |
|---|---|
| Luminos | These basic questions are great to determine whether one understands a conept. The multiple answers did unnerve me at first but will be beneficial. |
| Qoqi | Quick way to review the theory too |
| ldfrench | ^^Agree with Luminos |