Because of Convexity, When Interest Rates Change, the Actual Bond

question 47

Multiple Choice

Because of convexity, when interest rates change, the actual bond price will ________ the bond price predicted by duration.

• A) always be higher than
• B) sometimes be higher than
• C) always be lower than
• D) sometimes be lower than

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Definitions:

American System

The American System was an economic plan that played a significant role in American policy during the first half of the 19th century. It advocated for a strong federal government to create a protective tariff, a national bank, and infrastructure improvements.

Northeast

A region in the United States known for its historical significance, economic output, and dense population, typically including states in the upper Northeastern part of the country.

Slavery

A system in which people are legally owned by others as property and are forced to work without freedom or the right to compensation.

Nullification

The doctrine suggesting that states have the right to invalidate any federal law which they view as unconstitutional.