easy · Certified Financial Planner Professional Conduct
Jablonski is concerned about bond price volatility as interest rates rise. His linear duration estimate suggests a 5% drop in price.
How will the actual (convex) price change compare to this estimate?
- The actual price will be slightly lower than the duration estimate.
- The actual price will be slightly higher than the duration estimate.
- The actual price will be exactly equal to the duration estimate.
- The actual price depends solely on the bond's coupon rate, not convexity.
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