Consider a Bond Selling at Par with Modified Duration of 22

question 78

Multiple Choice

Consider a bond selling at par with modified duration of 22 years and convexity of 415. A 2% decrease in yield would cause the price to increase by 44% according to the duration rule. What would be the percentage price change according to the duration-with-convexity rule?

• A) 21.2%
• B) 25.4%
• C) 17.0%
• D) 52.3%

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