Par-value bond XYZ has a modified duration of 6. Which one of the following statements regarding the bond is true?
A. If the market yield increases by 1%, the bond's price will decrease by $60.
B. If the market yield increases by 1%, the bond's price will increase by $50.
C. If the market yield increases by 1%, the bond's price will decrease by $50.
D. If the market yield increases by 1%, the bond's price will increase by $60.
A. If the market yield increases by 1%, the bond's price will decrease by $60.
?P/P = ?D × ?y; ?$60 = ?6(0.01) × $1,000.
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