Assume that the modified duration of a bond is 2.45 years and that the potential adverse move in yield is 16.5 basis points.What is the bond's price volatility (round to two decimals)?
A)2.45 * 0.00165 = 0.40%
B)-2.45 * 0.00165 = -0.40%
C)2.45 * 0.0165 = 4.04%
D)-2.45 * 0.0165 = -4.04%

Question

Quizplus · Accepted Answer

The bond's price volatility is calculated as the product of the modified duration and the change in yield (in decimal form). The correct calculation is -2.45 * 0.00165 = -0.40%.

Assume That the Modified Duration of a Bond Is 2