An 8%,15-Year Bond Has a Yield to Maturity of 10

question 2

Multiple Choice

An 8%,15-year bond has a yield to maturity of 10% and a duration of 8.05 years.If the market yield changes by 25 basis points,how much change will there be in the bond's price?

• A) 1.85%
• B) 2.01%
• C) 3.27%
• D) 6.44%
• E) none of these

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Definitions:

Specialize

To focus on a specific area of production or study to gain efficiency or expertise.

Gains from Trade

The increase in welfare or economic benefit that countries or individuals obtain by engaging in voluntary exchanges where they specialize according to their comparative advantages.

Equilibrium

A state in a market where supply equals demand, leading to a stable situation where there is no tendency for prices to change, assuming other factors remain constant.

Scarcity

The fundamental economic problem of having limited resources to meet unlimited wants and needs.