Convexity Is Used to Correct the Approximate Percentage Change in Bond

question 26

True/False

Convexity is used to correct the approximate percentage change in bond value calculated using modified duration.

---

Definitions:

Financial Leverage

The use of borrowed funds with the intent to increase the return on equity.

EBIT-EPS Lines

Graphical representations that show the impact of financing choices, especially debt and equity, on a company's earnings per share (EPS) for various levels of earnings before interest and taxes (EBIT).

EPS

Earnings per share; a measure of a company's profitability calculated by dividing its net income by the number of outstanding shares.

EBIT

Earnings Before Interest and Taxes, a profitability measure for companies that doesn't include costs associated with taxes or interest.