CFA CFA Level 1 Question of the Week – Fixed Income

Question of the Week – Fixed Income

  • This topic has 8 replies, 8 voices, and was last updated Jan-18 by ec_test.
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  • AdaptPrep
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    How are upward-sloping yield curves explained by the Pure Expectations Theory?

    • There are separate markets for long-term and short-term securities, and the
      long-term market demands greater returns.
    • Future interest rates are expected to rise.
    • Investors in long-term securities demand a risk premium for tying their
      money up longer.
    AdaptPrep
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    The three major term structure theories are summarized below from the perspective of an upward-sloping yield curve:

    1. Pure Expectations Theory – Future interest rates are expected to rise.
    2. Liquidity Preference Theory – Investors in long-term securities demand a risk premium for tying their money up longer.
    3. Market Segmentation Theory – There are separate markets for long-term and short-term securities, and the long-term market demands greater returns.
    nar_bsoa
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    Thought i had done with Fixed income…then i saw this question…:)
    can anyone let know where in CFA curriculum i can find the above details…

    Pranav
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    yeah, got no recollection of this either πŸ™

    shannondaily
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    Boo! I got it wrong. :neutral_face: 

    RoyD
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    I swear KS notes don’t mention this one bit.

    jak5189
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    Yea, I didn’t see this in the Fixed Income section. I am trying to search for it in Econ as I think it might be there. 

    simply_complex2
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    i didn’t see it in Γ©lan guides. my guess is its not that important in terms of the exam but may be good to know

    ec_test
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    Thanks for posting this! I had no clue. I’m glad I ran into this. It is good review.

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