As a Bond Approaches Maturity, the Call Premium Typically Rises

question 123

True/False

As a bond approaches maturity, the call premium typically rises.

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Definitions:

Fair Value Hedge

A hedge of the exposure to changes in the fair value of an asset or liability, or an unrecognized firm commitment, that is attributable to a particular risk.

Thailand Bahts

The currency of Thailand, used as the standard monetary unit in the country.

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a predetermined price within a specified time frame.

Fair Hedge

A financial strategy used to reduce risk by taking offsetting positions in a security and its derivative, ensuring gains in one offset losses in the other.