A Three-Year Bond with a Current Yield of 10% Per

question 55

Multiple Choice

A three-year bond with a current yield of 10% per annum and a duration of 2.76 years,when compared with a four-year bond with a current yield of 12% per annum and duration of 3.43 years,will _______ when interest rates rise.

• A) have a greater fall in price
• B) have a smaller fall in price
• C) have the greater interest rate exposure
• D) not alter in price

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Definitions:

Sabbath Day

A day set aside for rest and worship according to Jewish, Christian, and some other religions’ traditions, typically observed from sunset on Friday to sunset on Saturday in Judaism and on Sunday in Christianity.

Promissory Estoppel

A legal principle preventing a party from retracting a promise when the other party has reasonably relied on that promise and acted upon it, leading to a detriment.

Reasonable Reliance

Relying on a statement or action in a manner that a reasonable person would consider justified under the circumstances.

UCC

The United States has implemented the Uniform Commercial Code, a wide set of legal principles, to govern commercial exchanges.