CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

When interest rates are high relative to a bond's coupon, the effective duration of a putable bond should be ______ that of an otherwise identical straight bond.

A. higher than
B. similar to
C. lower than
Correct Answer: C

The put option is in the money. The investor can put the bond and reinvest the proceeds at a higher yield.

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