Exam ICWIM Topic 1 Question 86 Discussion

Actual exam question for CISI's ICWIM exam
Question #: 86
Topic #: 1
Assuming an upward-sloping yield curve that does not change, how can a fund manager profit from buying a longer-dated bond?

Suggested Answer: A Vote an answer

In an upward-sloping yield curve, long-term bonds typically have higher yields than short-term bonds. As the bond nears maturity:
* Price Appreciation: The bond price rises as the yield declines due to the pull-to-par effect.
* Capital Gains Opportunity: A fund manager can sell the bond before maturity for a profit if interest rates remain unchanged.
* Yield and Price Relationship: Bond prices move inversely to yields. When yields fall, prices rise, allowing for a profit upon sale.
# Reference: CISI Wealth & Investment Management (Fixed-Income Securities), CFA Institute (Bond Pricing & Yield Curves).

by Mabel at Sep 27, 2025, 05:00 AM

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