Question #27
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options
PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options.pdf
Page: 8
Status: Correct
Correct Answer: A
Question
Bill Moxley, CFA is evaluating three bonds for inclusion in fixed income portfolio for one of his pension fund clients. All three bonds have a coupon rate of 3%, maturity of five years and are generally identical in every respect except that bond A is an option-free bond, bond B is callable in two years and bond C is putable in two years. The yield curve is currently flat. If the yield curve is expected to have a parallel downward shift, the bond with the highest price appreciation is least likely to be:
Answer Choices:
A. Bond A
B. Bond B
C. Bond C
No explanation available for this question.