Question $1$

A bond's yield and price are inversely related, and the relationship is convex. Which of

the following statements is true?

A bond's price and yield are independent to each other, and a change in the yield would not

affect the price.

Because of the convex relationship, the price change if the yield goes up by certain amount

would be equal to the price change if the yield goes down by exact same amount.

Because of the inverse relationship, a bond's price will go up when its yield increases.

A bond's price sensitivity to changes in yield depends on the current yield. If the current yield

is small, we expect a large price change when yield changes. If the current yield is large, we

expect a small price change when yield changes.