CFA Practice Question

CFA Practice Question

A fixed income manager wants to take advantage of a forecast decline in interest rates over the next several months. Which of the following combinations of maturity and coupon rate would most likely result in the largest increase in portfolio value?
A. Maturity: 2025, Coupon rate: 10%
B. Maturity: 2025, Coupon rate: 12%
C. Maturity: 2035, Coupon rate: 10%
Explanation: All else equal, the longer the term to maturity, the greater the price volatility. The lower the coupon rate, the greater the price volatility.

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