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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