Because of Convexity, When Interest Rates Change, the Actual Bond

question 47

Multiple Choice

Because of convexity, when interest rates change, the actual bond price will ________ the bond price predicted by duration.

• A) always be higher than
• B) sometimes be higher than
• C) always be lower than
• D) sometimes be lower than

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Definitions:

Unstated Belief

An implicit conviction or assumption that influences one's attitudes and behaviors without being directly expressed or acknowledged.

Rational Emotive Behavior Therapy

A form of cognitive-behavioral therapy that identifies and challenges irrational beliefs to alter dysfunctional emotions and behaviors.

Emotional Reaction

An individual's response to a specific stimulus or situation, often involving complex psychological and physiological processes.