Assuming Market Value and PV01 Constant,which of the Following Is

question 6

Multiple Choice

Assuming market value and PV01 constant,which of the following is true of convexity?

• A)Higher the convexity of a bond portfolio,the larger the value of the portfolio for both an increase and a decrease in its yield to maturity.
• B)Other things being equal,investments with a little convexity or negative convexity are in some sense better than investments with a large amount of convexity.
• C)Higher the convexity of a bond portfolio,the smaller the value of the portfolio for an increase in its yield to maturity.
• D)Convexity depends on the scale of investment and the maturity of bonds.

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Definitions:

Marginal Cost Curve

The marginal cost curve graphically represents how the cost of producing one additional unit of a good changes as production volume varies.

Marginal Product

The increased output achieved by adding one more unit of a certain input, with all other inputs held steady.

Marginal Cost

The cost of producing one additional unit of a good or service, used in decision-making on production levels.

Average Total Cost

The average cost per unit of output expressed as the total production cost divided by the number of units produced.