The volatility of a bond is given by
A)duration/(1 + yield)only.
B)slope of the curve relating the bond price to the interest rate only.
C)yield to maturity only.
D)duration/(1 + yield)and slope of the curve relating the bond price to the interest rate only.

Question

Quizplus · Accepted Answer

The volatility of a bond is affected by both duration and the slope of the curve relating the bond price to interest rates. Duration measures the sensitivity of a bond's price to changes in interest rates, while the slope of the curve reflects the shape of the yield curve (i.e., whether it is steep or flat). Therefore, the best choice is D, which includes both duration and the slope of the curve.

The Volatility of a Bond Is Given by