If a Bond's Volatility Is 5% and the Interest Rate

question 2

Multiple Choice

If a bond's volatility is 5% and the interest rate changes by 0.5% (points) then the price of the bond:

• A) changes by 5%
• B) changes by 2.5%
• C) changes by 7.5%
• D) none of the above

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Definitions:

Counterconditioning

A behavior therapy technique involving the conditioning of an unwanted behavior or response to a stimulus into a desired behavior by association with a positive action or outcome.

Transference

The process by which emotions, desires, and expectations originally associated with one person are unconsciously redirected towards another person.

Resistance

The refusal to accept or comply with something; the attempt to prevent something by action or argument.

Unconscious

Part of the mind that is inaccessible to the conscious mind but that affects behavior and emotions.