If a Bond's Volatility Is 10

question 49

Multiple Choice

If a bond's volatility is 10.00% and the interest rate goes down by 0.75% (points) ,then the price of the bond:

• A)decreases by 10%
• B)decreases by 7.5%
• C)increases by 7.5%
• D)increases by 0.75%

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Definitions:

Novation

The act of replacing an old obligation with a new one, substituting a new party for an original party in an agreement, with the consent of all parties involved.

Restitution

The act of restoring or compensating someone for loss, damage, or injury that has been incurred.

Repudiated Contract

This term refers to a contract that has been rejected or declared void by one of the parties involved, indicating they do not intend to fulfill their contractual obligations.

Liquidated Damages

A contractual provision that determines in advance the amount of damages to be paid if a party breaches the agreement.