A High Convexity Value on a Bond Suggests

question 65

Multiple Choice

A high convexity value on a bond suggests

• A) the non-existence of reinvestment risk.
• B) a higher price increase when interest rates fall.
• C) a lower price decrease when interest rates fall.
• D) the duration is equal to maturity.
• E) price changes are identical for both increase and decrease in interest rates.

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Definitions:

Perfectly Competitive Market

A market structure characterized by a large number of buyers and sellers, homogeneous products, and easy entry and exit, leading to price-taking behavior.

Variable Costs

Costs that vary directly with the level of output or business activity, such as materials and labor.

Revenues

The total income produced by a company from its activities, before any expenses are subtracted.

Long-run Supply Curve

A graphical representation that shows the relationship between the price of a good and the quantity supplied over a period long enough for producers to adjust all of their inputs.