EOC - R22 - Q8

EOC Q: What is the limitation of a yield-pick up trade?

I saw the solution there is very very long.

If this is a 4 mins question, what will you answer?

My answer:

  • It’s not from total return perspective

  • Lower yield bond spread may narrow and high yield bond spread may unchange or widen

Can I get the full credit? 4/4 or 3/4? Thanks.

EOC solution fyi.

[answer removed by admin]


I think you’d have at least 3 of 4. May want to add little more to total return rationale. Along lines of “it assumes interest rates will not change to maturity and all coupons will be reinvested at the ytm and is unrealistic.”

not sure why you are raking up OLD sessions (2015 circa) now - and assigning points to someone who is a CFA Charterholder already!

That sounds like a better answer! Thanks!

Because I had the exact the same question so I didn’t want to type everything again… Next time, I will try to create my own.

It’s from last year cpk but people rebump old questions all the time. It’s better to rehash old posts then to clutter the boards with new ones.

what exactly was the question? Comment on answer? how much of a grade would you give? “Anyone?” as asked could mean a whole host of things, doesn’t it?

The curriculum is pretty clear in what answer they’d be looking for here. Go to your vital source and search yield pickup trade in FI.