9-52 The error from using duration to estimate the new price of a fixed-income security will be less as the amount of convexity increases.

Question

Quizplus · Accepted Answer

The error from using duration to estimate the new price of a fixed-income security will be less as the amount of convexity decreases, not increases. Convexity accounts for the curvature in the price-yield relationship, and higher convexity means a greater deviation from the linear approximation provided by duration.

9-52 the Error from Using Duration to Estimate the New