A Bond Has a Modified Duration of 5

question 31

Multiple Choice

A bond has a modified duration of 5.4 years, and a yield to maturity 11.6 percent. If the yield-to-maturity instantly decreases to 11%, the bond's price will increase by

• A) 3.24%
• B) 3.93%
• C) 3.67%
• D) 3.41%
• E) 3.53%

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Definitions:

Break Even

The point at which total costs and total revenues are equal, resulting in no net loss or gain.

Linear Equations

Equations where the highest power of the variable is one, creating a straight line when graphed.

Elimination

In solving systems of equations, elimination involves adding or subtracting equations to remove one variable, making it easier to solve for the others.

Solution

The answer to a problem or the explanation for a question, especially in mathematics or science.