Duration times the reinvestment rate will give the approximate change in bond price for a 1 percent change in interest rates.

Name: Duration times the reinvestment rate will give the approximate change in bond price for a 1 percent change in interest rates.
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Question

Quizplus · Accepted Answer

Duration measures the sensitivity of a bond's price to changes in interest rates, not the reinvestment rate. It estimates the percentage change in bond price for a 1 percent change in interest rates.

Duration Times the Reinvestment Rate Will Give the Approximate Change