At the Maturity of a Bond Option, It Is Estimated

question 8

Multiple Choice

At the maturity of a bond option, it is estimated that the underlying bond will have a duration of 6 years and a yield of 5%. The forward yield volatility is quoted as 25%. What is the volatility of the forward bond price?

• A) 3%
• B) 30%
• C) 20.8%
• D) 7.5%

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Definitions:

Environmental Issues

Problems related to the natural environment, including pollution, climate change, and biodiversity loss.

Environmental Costs

The negative impacts on the environment resulting from human activities, including pollution, resource depletion, and habitat destruction.

Market Costs

Expenses associated with buying, selling, and producing goods or services within a market economy.

Pollutants

Substances that contaminate the natural environment, causing harmful effects on living organisms and ecosystems.