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Modified duration of a bond overstates

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Reference no: EM131736634

True or False

State whether each of the following statements are true or false.

a) For a given term to maturity and initial yield, the price volatility of a bond is greater the larger is the coupon rate.

b) For a given coupon rate and initial yield, the price volatility of a bond is greater the longer is its term to maturity.

c) The percentage change in the price of a bond due to a 100 basis point increase in required yield is greater when the initial yield is high compared to when the initial yield is low.

d) The Modified Duration of a bond overstates changes in price when there is a large increase in required yield and understates changes in price when there is a large decrease in required yield.

Reference no: EM131736634

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