Consider a Security with a Duration of 2

question 43

Multiple Choice

Consider a security with a duration of 2.78 years.The current interest rate level is 10% per annum.How does the price of the security change if interest rates decrease by 100 basis points (round to two decimals) ?

• A)The price of the security will decrease by 1%.
• B)The price of the security will increase by 1%.
• C)The price of the security will decrease by 2.50%.
• D)The price of the security will increase by 2.50%.