- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. The Term Structure and Interest Rate Dynamics
- Subject 5. Yield Curve Factor Models
CFA Practice Question
Which factor is most likely the change in the yield curve steepness?
A. Factor 1
B. Factor 2
C. Factor 3
Explanation: For factor 2, a unitary positive standard deviation change appears to raise rates at shorter maturities (e.g., +0.5071% for 0.25-year bonds), but lower rates at longer maturities (e.g., -0.3645% for 20-year bonds). This factor seems to cause changes in the steepness or slope of the yield curve.
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