Benjiko

Now this has me thinking. Isn't the % change is price formula equal to:

-De*change in r + C*change in r^2

If the rate goes up the price should decrease by -4 * .02 + the effect of convexity. That would be -.08 + what ever effect convexity has which was not indicated.

Was this possibly one of the tricky CFAI questions as the choices were greater than 4%, 4% and less than 4%. With that said -8% is still less than 4%!

Any thoughts???