A Bond Has a Duration of 7

Question 43
Multiple Choice

A bond has a duration of 7.5 years. Its current market price is $1125. Interest rates in the market are 7% today. It has been forecasted that interest rates will rise to 9% over the next couple of weeks. How will this bank's price change in percentage terms? A) This bond's price will rise by 2 percent. B) This bond's price will fall by 2 percent. C) This bond's price will not change D) This bond's price will rise by 14.02 percent E) This bond's price will fall by 14 .02 percent