The importance of convexity increases as
A) time passes
B) the level of interest rates rises
C) the level of interest rates falls
D) the magnitude of the rate change increases

Question

Quizplus · Accepted Answer

Convexity becomes more important as the magnitude of the rate change increases because it measures the sensitivity of the duration of a bond to changes in interest rates, especially for large rate changes.

The Importance of Convexity Increases as