If Investors Rely Strictly on Modified Duration to Estimate the Percentage

question 66

Multiple Choice

If investors rely strictly on modified duration to estimate the percentage change in the price of a bond, they will tend to ____ the price decline associated with an increase in rates and ____ the price increase associated with a decrease in rates.

• A)underestimate; underestimate
• B)overestimate; overestimate
• C)underestimate; overestimate
• D)overestimate; underestimate

---

Definitions:

Employers Table

A table typically found in databases that stores information related to employees or individuals employed by an organization.

Subdatasheets

A feature in Microsoft Access that allows a nested table to be displayed within the main table, used to show related records.

Totals Button

A feature in database and spreadsheet software that automatically calculates and displays the total for selected numeric fields in a dataset.

Records Group

A set of records categorized or grouped together based on specific criteria within a database management system.