Consider a Bond Selling at Par with Modified Duration of 22

question 78

Multiple Choice

Consider a bond selling at par with modified duration of 22 years and convexity of 415. A 2% decrease in yield would cause the price to increase by 44% 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) 52.3%

Understand the concept of physiological needs creating aroused states that drive behavior.

Appreciate the role of evolutionary psychology in explaining species-typical behaviors.

Understand the concept of sampling distributions including the F distribution and chi-square distribution in the context of hypothesis testing.

Formulate null and alternative hypotheses for testing population variance.

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Definitions:

Output Effect

The impact on the total production of goods and services in an economy resulting from changes in demand, supply, technology, or factors of production.

Factors of Production

The basic inputs used to produce goods and services, including land, labor, capital, and entrepreneurship.

Complementary Resource

A good or service that is used together with another good or service to provide a benefit or function.

Substitution Effect

The economic understanding that as prices rise or incomes decrease, consumers replace more expensive items with less costly alternatives.