based on the image from CFAI text the rolldown return has been calculated by just changing the number of periods from N=10 to N=9.5, However, shouldn’t rolldown return be calculated on lower YTM as after 6 months the ytm would be different.
Can someone please help with this query?
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The curriculum is, alas, unclear on this.
I’ll contact CFA Institute and see if I can get some clarity.
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Roll down return is calculated assuming unchanged YC. In the example on the image YTMs for 10 and 9.5 years are equal each other. Hence YC supposed to be flat and the above definition for roll-down (of no change in ytm) is correct (but only in this particular case)
That’s not clear until you read their explanation; i.e., there’s no way for the candidate to know that’s what they intend without reading the solution.
CFAI book just assumes flat yield, when the yields can change as time passes on as long as yield curve remains unchanged.
My point is that you don’t learn that until you read the answer.
A fair question would let you know that assumption from the start.
Agreed