If a Bond's Volatility Is 10

question 53

Multiple Choice

If a bond's volatility is 10.00 percent and the interest rate goes down by 0.75 percent (points) , then the price of the bond

• A)decreases by 10.00 percent.
• B)decreases by 7.50 percent.
• C)increases by 7.50 percent.
• D)increases by 0.75 percent.

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Definitions:

Understated

A term describing a figure reported in financial statements that is lower than the actual figure.

Estimated Cost

An approximation of the financial expenditure associated with a project, operation, or transaction, often used for budgeting purposes.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated for cost of goods sold determination.

Gross Profit

The difference between sales and the cost of goods sold, indicating the profitability of a company's core business activities.