A Bond Has a YTM of 6

question 16

Multiple Choice

A bond has a YTM of 6.5%, a modified duration of 16.9 years, a duration of 18 years and a 30 year maturity. By what percentage will the bond's price change if market interest rates increase by 0.75%?

• A) +12.675 percent.
• B) - 12.675 percent.
• C) +0.750 percent.
• D) - 0.750 percent.

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Definitions:

Mortgage

A legal agreement by which a bank or creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

Debtor

An entity or person that owes money to another party.

Instrument

A tool or device used for performing specific tasks, often scientific, musical, or technical functions.

Closing Package

The collection of documents that finalize a transaction, often involving the transfer of property or completion of a financial agreement.