Question

FOR A SIGNIFICANT INCREASE IN THE
INTEREST RATE PRICE VARIATION
DERIVED FROM USING MODIFIED DURATION
TENDS TO
A. Accurately predict the fall in price of the bond
B. Overpredicts the fall in price
C. Underpredicts the fall in price
D. Overpredicts the rise in price
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SKID Am

Answer 1

Answer:

C. Underpredicts the fall in price