Suppose you have the following bond:

Par Value:	$1,000.00		Price:	$1,105.90
Coupon	3.775%/period		YTM:	2.9105%/period
Duration:	11.906 periods

According to duration, how much is the price predicted to change if the yield to maturity goes down by 0.25% per period?

  

Rise by $31.99.

 

  

Fall by $28.92.

 

The current price, not the par value, determines interest rate sensitivity. (Also, check the sign.)

  

Fall by $31.99.

 

  

Rise by $28.92.

 

  

Fall by $3,198.62.

Answer rating: 100% (QA)

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