Question
For revision purpose only - Advanced Financial Management Consider the following two Treasury Securities BOND PRICE MODIFIED DURATION (YEARS) A $1,000.00 6 B $800.00 7
For revision purpose only - Advanced Financial Management
Consider the following two Treasury Securities
| BOND | PRICE | MODIFIED DURATION (YEARS) |
| A | $1,000.00 | 6 |
| B | $800.00 | 7 |
Which bond will have the greater Dollar Price Volatility for a 25 Bases Point change in interest Rates?
Percentage price change = CONVEXITY EFFECT + DURATION EFFECT
However for this question use the estimate dollar price change as DP = -(modified Duration)P(DY).
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The Finance Book
Authors: Stuart Warner, Si Hussain
2nd Edition
1292401982, 978-1292401980
