A bond with a 12 year duration will have a 24% price increase if the yield curve shifts downward. A bond with an 8 year duration should have a price change of

Question

Quizplus · Accepted Answer

The price change of a bond due to a shift in the yield curve can be approximated by the formula: Price Change % ≈ -Duration × Yield Change %. Given that a bond with a 12-year duration experiences a 24% price increase, we can infer that the yield change is -2% (since -12 × -2% = 24%). For a bond with an 8-year duration, the price change would be -8 × -2% = 16%.

A Bond with a 12 Year Duration Will Have a 24