If three bonds are otherwise identical, the one exhibiting the highest level of positive

Bond 1 has an effective duration of 3.7. If the bond yield changes by 100 basis points, the price of the bond will change by:

A. approximately 0.37%.

B. approximately 3.7%.

C. exactly 0.37%.

An 8%, semiannual pay, option-free bond that is trading at par is maturing in 8 years. The effective duration of the bond based on a 50 basis point change in rates is closest to:

A. 3.9

B. 4.0

C. 5.8

Amy Lee, a fixed income analyst gathers the following table with the yields and corresponding prices for a hypothetical 10-year option-free bond which initially yields 8%:

Using a 10 basis point rate shock, the duration of this bond is closes to:

A. 8.78

B. 17.56

C. 4.39

A fixed income security’s current price is 101.65. You estimate that the price will rise to 102.98 ifinterest rates decrease 0.25% and fall to 100.91 if interest rates increase 0.25%. The security’s effective duration is closest to:

A. 3.98

B. 4.07

C. 4.87