medium · Certified Financial Planner Tax Planning
A CFP professional is conducting a performance review of a bond portfolio for the Fournier family. The planner notes that market interest rates have just risen by 1%. The portfolio's duration is 7.0.
Which statement best describes the likely change in the portfolio's true market value?
- The value will fall by slightly less than 7.0%.
- The value will rise by 7.0% because of positive convexity.
- The value will fall by slightly more than 7.0%.
- The value will fall by exactly 7.0%.
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