Question #38
Reading: Reading 27 Valuation and Analysis of Bonds With Embedded Options - Anwers
PDF File: Reading 27 Valuation and Analysis of Bonds With Embedded Options - Anwers.pdf
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Question
For an option-free bond trading at par, it is least likely that:
Answer Choices:
A. The spot rate for the maturity of the bond is least important rate affecting the value of the bond
B. The rate durations for all the rates other than the maturity-matched rate are zero
C. Its maturity key rate duration is the same as its effective duration. Explanation If an option-free bond is trading at par, the bond's maturity-matched rate (or the spot rate applicable to its maturity) is the only rate that affects the bond's value. Its maturity key rate duration is the same as its effective duration, and all other key rate durations are zero. (Module 27.6, LOS 27.k)
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