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Question:

Wendy Jones, CFA, is reviewing a current bond holding. The bond's duration is 10 and its convexity is 200. Jones believes that interest rates will decrease by 100 basis points. If Jones's forecast is accurate, the bond's price will change by approximately:

A +11.0%.
Explaination

You can answer this question without calculations. A decrease in interest rates must cause the price to increase. Because duration alone will underestimate a price increase, the price must increase by more than 10%.
Percentage change in price = $2589_w629_h75.png$