What Is the Impact of a 50 Basis Point Increase

question 38

Multiple Choice

What is the impact of a 50 basis point increase in interest rates on the net asset value of an open-end bond mutual fund holding a seven year, $100 million face value 7 percent annual coupon bond selling at par? The fund has 10 million shares.

• A)An increase of $0.24 per share.
• B)A decrease of $0.265 per share.
• C)An increase of $0.05 per share.
• D)A decrease of $0.05 per share.
• E)An increase of $0.265 per sharE.