1215

A bond has a modified duration of 6 and a convexity of 62.5. What happens to the bond's price if interest rates rise 25 basis points? It goes:

A) down 15.00%.

B) down 1.46%.

C) up 1.46%.

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?P = [(-MD × ?y) + (convexity) × (?y)²] × 100

?P = [(-6 × 0.0025) + (62.5) × (0.0025)²] × 100 = -1.461%