Par-Value-Bond GE Has a Modified Duration of 11

question 37

Multiple Choice

Par-value-bond GE has a modified duration of 11. Which one of the following statements regarding the bond is true?

• A) If the market yield increases by 1%, the bond's price will decrease by $55.
• B) If the market yield increases by 1%, the bond's price will increase by $55.
• C) If the market yield increases by 1%, the bond's price will decrease by $110.
• D) If the market yield increases by 1%, the bond's price will increase by $110.

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Definitions:

Substitutes

Goods or services that can replace each other in use, where a rise in the price of one leads to an increase in demand for the other.

Complements

Goods or services that are often used together, where an increase in demand for one leads to an increase in demand for the other.

Substitute Good

A product or service that consumers can use in place of another product or service, influenced by changes in prices, tastes, and other factors.

Market Demand Curve

A graphical representation showing the total quantity of a good or service that consumers in a market are willing and able to purchase at various prices.