Question #58
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
Joseph Dentice, CFA is evaluating three bonds. 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. If interest rates increase, the duration of which bond is most likely to decrease?
Answer Choices:
B. Explanation Increase in rates would increase the likelihood of the put option being exercised and reduce the expected life (and duration) of the putable bond the most. (Module 27.5, LOS 27.j)
C. Bond
No explanation available for this question.