A high convexity value on a bond suggests

Question

Quizplus · Accepted Answer

Convexity measures the curvature of the relationship between bond prices and interest rates. A high convexity value suggests that the price of the bond will increase more when interest rates fall, providing investors with a higher potential return. It does not necessarily imply the non-existence of reinvestment risk or a specific relationship between duration and maturity. It also does not suggest that the price changes will be identical for both increases and decreases in interest rates. Therefore, B is the best answer.

A High Convexity Value on a Bond Suggests