A bond that has positive convexity:
A)is more price sensitive when rates fall then when rates rise.
B)is more price sensitive when rates rise then when rates fall.
C)has a negative duration.
D)has a duration greater than maturity.
E)a.and d.

Question

Quizplus · Accepted Answer

Positive convexity means that the bond's price sensitivity to changes in interest rates is not symmetric. As interest rates fall, the bond's price will increase by more than it would decrease by if interest rates rise. So, the bond is more price sensitive when rates fall than when rates rise.

A Bond That Has Positive Convexity