A 12-Year, 8% Bond with a YTM of 12% Has

question 64

Multiple Choice

A 12-year, 8% bond with a YTM of 12% has a Macaulay duration of 9.5 years. If interest rates decline by 50 basis points, what will be the percentage change in price for this bond?

• A) +4.48%
• B) +4.61%
• C) +8.48%
• D) +8.96%
• E) +17.92%

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Definitions:

Composition

In mathematics, composition is the application of one function to the result of another, denoted as \((f \circ g)(x) = f(g(x))\).

Composition

The process of combining two functions by applying one function to the results of another.

Function

A relation between sets that assigns to each element of a set exactly one element of another set.

Composition

The process of combining two functions in such a way that the output of one function becomes the input of another.