Which of the following statements is true?
A) An inverse relationship exists between coupon and convexity.
B) A direct relationship exists between maturity and convexity.
C) An inverse relationship exists between yield and convexity.
D) Choices a and c only
E) All of the above statements are true

Question

Quizplus · Accepted Answer

Convexity is a measure of how much the price of a bond changes in relation to changes in interest rates. A bond with positive convexity will have a price that is more sensitive to changes in interest rates than a bond with negative convexity.An inverse relationship exists between coupon and convexity. This is because a bond with a higher coupon will have a lower price, and a bond with a lower price will have higher convexity.A direct relationship exists between maturity and convexity. This is because a bond with a longer maturity will have a higher price, and a bond with a higher price will have lower convexity.An inverse relationship exists between yield and convexity. This is because a bond with a higher yield will have a lower price, and a bond with a lower price will have higher convexity.

Which of the Following Statements Is True