Consider a Bond Selling at Par with Modified Duration of 10.6

question 72

Multiple Choice

Consider a bond selling at par with modified duration of 10.6 years and convexity of 210.A 2 percent decrease in yield would cause the price to increase by 21.2%,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)10.6%
• E)none of the above.

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Definitions:

Beginning Capital Balance

The amount of capital at the start of a financial period before any transactions have been accounted for during the period.

Withdrawals

Money or assets taken out from a business by its owner for personal use or from a bank account by the account holder.

Investments

Assets acquired with the goal of generating income or increasing in value over time.

Statement Of Owner's Equity

A financial statement detailing changes in the equity of a company's owner over a reporting period.