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:

Administrative Expenses

Costs related to the general operation of a business, which are not directly tied to production or sales, such as salaries of administrative personnel and office supplies.

Patient-Visits

The number of individual patient encounters with healthcare providers, often used as a measure in medical and dental practices.

Spending Variance

The difference between the budgeted or standard cost of an activity and its actual cost.

Dye Costs

The expenses associated with acquiring dyes used in the manufacturing or production process.