If the Bond Market Undergoes a Large Change in Yield

question 31

Multiple Choice

If the bond market undergoes a large change in yield (for example, more than 100 basis points) , then a bond's duration will

• A)understate both the price appreciation when rates fall and the price decline when rates increase.
• B)overstate both the price appreciation when rates fall and the price decline when rates increase.
• C)overstate the price appreciation when rates fall and understate the price decline when rates increase.
• D)understate the price appreciation when rates fall and overstate the price decline when rates increase.

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Definitions:

Genome

A genome is the complete set of DNA, including all of its genes, in an organism, encapsulating the entire genetic information.

Monozygotic

Pertaining to identical twins who developed from a single fertilized egg and share all of their genes.

Dizygotic

Refers to twins that are formed from the fertilization of two separate eggs by two separate sperm, resulting in fraternal twins that are genetically distinct, akin to regular siblings sharing approximately 50% of their genes.

Epigenetic

The study of changes in gene expression caused by mechanisms other than changes in the underlying DNA sequence.