Consider a Bond Selling at Par with Modified Duration of 12

question 21

Multiple Choice

Consider a bond selling at par with modified duration of 12 years and convexity of 265.A 1 percent decrease in yield would cause the price to increase by 12%,according to the duration rule.What would be the percentage price change according to the duration-with-convexity rule?

• A) 21.2%
• B) 25.4%
• C) 17.0%
• D) 13.3%
• E) None of these is correct.

---

Definitions:

Collective Unconscious

A term coined by Carl Jung, referring to structures of the unconscious mind shared among beings of the same species.

Latent Memory Traces

Hidden or inactive records of past experiences that can potentially be recalled.

Strive

To make great efforts to achieve or obtain a specific objective.

Inferiority

A feeling of lower status or quality compared to others, often associated with low self-esteem or lack of confidence.