CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

Consider a yield curve that is upward sloping. Assume you have a 2-year investment horizon and the yield curve won't change. Which strategy will have the lowest return?

A. buy a 2-year bond and hold it to maturity.
B. buy a 5-year bond and sell it after 2 years.
C. buy a 10-year bond and sell it after 2 years.
Correct Answer: A

As long as the yield curve remains unchanged, the strategy of rolling down the yield curve can always boost returns over buying a shorter term bond and holding to maturity.

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