CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

A bond has a modified duration of 6.5 and convexity of -84.8. If interest rates decrease by 1.0 percent, the percentage change in the value of the bond will be closest to:
A. 3.92%
B. +2.76%
C. +6.08%
Explanation: The percentage change in the bond's value is equal to: (-Duration x Δy* x 100%) + (C x (Δy*)2 x 100%) = (-6.5 x -0.01 x 100%) + 0.5 x (-84.8) x (-0.01)2 x 100% = +6.5% - 0.424% = +6.08

User Contributed Comments 0

You need to log in first to add your comment.