Consider a Bond with a Duration of 8 Years Having

question 101

Multiple Choice

Consider a bond with a duration of 8 years having a yield to maturity of 8% and interest rates are expected to rise by 50 basis points. What is the percentage change in the price of the bond?

• A)3.85%
• B)3.45%
• C)-4.02%
• D)-3.45%
• E)-3.85%

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Definitions:

Logical Order

The arrangement of ideas, statements, or events in a sequence that follows a coherent and orderly pattern, often used to enhance understanding or argumentation.

Balance Theory

A theory which proposes that the motivation to maintain consistency among one’s thoughts colors how people form new attitudes and can also drive them to change existing attitudes.

Cognitive Dissonance

A psychological conflict resulting from incongruous beliefs and attitudes held simultaneously.

Thoughts

Mental processes or ideas that occur as part of cognitive functions like reasoning, perception, and judgment.