A bond has a Macaulay duration of 6.0, modified duration of 6.5, and convexity of 50.25. If the bond’s yield to maturity decreases by 50 bps, the expected percentage price change is closest to:
- 3.06%.
- 3.31%.
- 3.25%.
1st question is MD should be less than D
2nd question is while finding out the % price change what should be used: D or MD
The answer would be B. dekho MD should be less than D but question m alag alag given hai toh hume question ke according chlna honga.
MD should be used while calculating change in price.