Question: For revision purpose only - Advanced Financial Management Consider the following two Treasury Securities BOND PRICE MODIFIED DURATION (YEARS) A $1,000.00 6 B $800.00 7

For revision purpose only - Advanced Financial Management

Consider the following two Treasury Securities

BOND PRICE MODIFIED DURATION (YEARS)
A $1,000.00 6
B $800.00 7

Which bond will have the greater Dollar Price Volatility for a 25 Bases Point change in interest Rates?

Percentage price change = CONVEXITY EFFECT + DURATION EFFECT

However for this question use the estimate dollar price change as DP = -(modified Duration)P(DY).

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