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Given the following information, which bond has the greater interest rate risk and what is the change in price if rates increase by 50 basis points? Assume convexity in the table below was calculated using the following equation: (P-Δy + P+Δy - 2 × P0) / (2 × P0 × Δ y2).
A. Bond B, change in price = -27.4%. B. Bond A, change in price = -2.14%. C. Bond B, change in price = -3.59%. D. Bond A, change in price = -9.35%. |