Consider a Bond Selling at Par with Modified Duration of 12

question 72

Multiple Choice

Consider a bond selling at par with modified duration of 12 years and convexity of 265. A 1% decrease in yield would cause the price to increase by 12%, 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) 13.3%

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Definitions:

Norms

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Traits or features that prevail over others, often influencing outcomes or distinguishing individuals or species in biological and social contexts.

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