If the bonds yield to maturity decreases by 100 basis, Financial Management

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If the bonds yield to maturity decreases by 100 basis

A 9-year, fixed-rate, semiannual-pay bond has a coupon rate of 7%, is currently callable at 102% of par value, and offers a yield to maturity of 4%. The bond has a modified duration of 4.

If the bond’s yield to maturity decreases by 100 basis points, the bond’s price is most likely to:

A increase by 4%.

B decrease by 4%.

C remain relatively unchanged.

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Financial Management: If the bonds yield to maturity decreases by 100 basis

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