CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

A 8%, 30-year bond is being valued at a 4% flat yield curve with 20% interest rate volatility. The bond is putable in 10 years. Which key rate duration is the highest for this bond?

A. 2-year
B. 10-year
C. 30-year
Correct Answer: C

The bond has a high coupon so it is unlikely to be put. It behaves like an otherwise identical 30-year option-free bond.

User Contributed Comments 2

User Comment
davidt87 if it were instead a 4% coupon bond would the answer be B?
CFAJ yes because it would likely be put as soon as possible and so you should treat it like a bond with a maturity of ten years
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