Par Value Bond XYZ Has a Modified Duration of 6

question 84

Multiple Choice

Par value bond XYZ has a modified duration of 6.Which one of the following statements regarding the bond is true?

• A)If the market yield increases by 1% the bond's price will decrease by $60.
• B)If the market yield increases by 1% the bond's price will increase by $50.
• C)If the market yield increases by 1% the bond's price will decrease by $50.
• D)If the market yield increases by 1% the bond's price will increase by $60.
• E)None of the above.

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Definitions:

Continuous Future

A type of futures contract used in commodities trading that is synthesized from several futures contracts to create a continuous, seamless price series.

Stock Price

The cost at which a share of a company is bought or sold in the stock market.

Interest Rate

is the cost of borrowing money, expressed as a percentage of the total amount loaned, paid to lenders by borrowers for the use of the borrowed funds.

Expected Future Profits

The anticipated earnings or returns a company or investment is predicted to generate in the future, based on current trends or calculations.