An 8%, 30-Year Bond Has a Yield to Maturity of 10

question 79

Multiple Choice

An 8%, 30-year bond has a yield to maturity of 10% and a modified duration of 8 years. If the market yield drops by 15 basis points, there will be a ________ in the bond's price.

• A) 1.15% decrease
• B) 1.2% increase
• C) 1.53% increase
• D) 2.43% decrease

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Definitions:

Cube

In geometry, a cube is a three-dimensional solid object bounded by six square faces, facets or sides, with three meeting at each vertex.

Sum of the Cubes

A mathematical operation that involves adding together the cubes (third power) of a series of numbers.

Fibonacci Sequence

A series of numbers where each number is the sum of the two preceding ones, starting from 0 and 1.

Base Cases

Specific scenarios in recursion that terminate the recursive process, necessary to avoid infinite loops and ensure the algorithm completes.