easy · Certified Financial Planner Estate Planning
Esker is comparing two bonds and notices that Bond A has higher convexity than Bond B. If interest rates fall, how will Bond A's price change relative to the linear estimate provided by its duration?
- The price will not change because duration and convexity offset each other.
- The true price will be lower than the duration estimate.
- The true price will be higher than the duration estimate.
- The true price will be exactly equal to the duration estimate.
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