What impact would you expect for a fall in the yield on a callable fixed coupon...
What impact would you expect for a fall in the yield on a callable fixed coupon bond?
a/ Price falls and convexity increases
b/ The price rises and convexity decreases
c/ The price rises and convexity increases
d/ Can't be certain
Homework Answers
Price and yield has inverse relationship. If yield is decreased price of the bond will be increased.
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If price increased convexity will increase.
Therefore, option C is correct.
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