3. If a bond has a modified duration D* = 5 years. please estimate what will be the change in the bond price (in %) when the yield to maturity declines 100 bp (4y = -1.00%). Answer: 4. Please check the only TRUE statement about duration rules (A) Holding maturity constant, a bond's duration D is lower when the coupon rate C is higher (B) Holding the coupon rate C constant, a bond's duration generally decreases with its time to maturity (C) The duration of a zero-coupon bond is identical to the duration of a coupon bond with the same maturity (D) Holding other factors constant, the duration D of a coupon bond is higher when the bond's yield to maturity is also higher (E) The lower the convexity of a bond, the higher the price increases will be when yields fall