You Own a Bond That Has a Duration of 6

question 63

Multiple Choice

You own a bond that has a duration of 6 years.Interest rates are currently 7% but you believe the Fed is about to increase interest rates by 25 basis points.Your predicted price change on this bond is ________.

• A) +1.40%
• B) -1.40%
• C) -2.51%
• D) +2.51%

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Definitions:

Bottom-up

An approach to processing information that starts with small, individual elements or details and integrates them to comprehend the whole.

Opponent-process Theory

A psychological and neurological model that explains a wide range of behaviors, including color vision, by proposing that certain pairs of colors are processed by mechanisms that work in opposition to each other.

After-image

A visual illusion in which retinal impressions persist after the removal of a stimulus, often seen in complementary colors.

Texture Gradient

Texture Gradient is a visual cue used to perceive depth, where objects with finer, denser textures are perceived as farther away compared to those with coarser, more widely spaced textures.