A Nine-Year Bond Has a Yield-To-Maturity of 10% and a Modified

question 22

Multiple Choice

A nine-year bond has a yield-to-maturity of 10% and a modified duration of 6.54 years. If the market yield changes by 50 basis points, the bond's expected price change is:

• A) 3.27%
• B) 3.66%
• C) 5.00%
• D) 6.54%

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Definitions:

Price

The amount of money required to purchase a good or service, determined by various factors including supply and demand.

Area

The extent or measurement of a surface or piece of land, often expressed in square units.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the good's sensitivity to price changes.

Orange Juice

A liquid extract derived from oranges, commonly consumed as a beverage rich in vitamin C.