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Basic Question 2 of 4

A bond has a modified duration of five and a convexity of 32. If its yield-to-maturity goes down by 25 bps, the bond price will go up by 1.26%. This is likely caused by ______.

A. a change in government benchmark yield
B. a change in the spread
C. either, or both

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Learning Outcome Statements

explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes;

CFA® 2024 Level I Curriculum, Volume 5, Module 46.