00:01
So here we have some statements about bonds, right? and so let's evaluate them.
00:07
The first one says that if the yield goes down, the price goes up, right? this is true, right? this is fundamental bond pricing, right? the coupon is fixed.
00:20
So if yield went down, right, the amount, the return, price must have gone up, right? the coupon is fixed.
00:30
So if that coupon is now a smaller percentage, it must mean that you're paying more for the bond.
00:37
Two, duration goes up implies sensitivity goes up.
00:47
This is also true, right? because think about in general, price for a bond is a function of the payments over one plus r to the x, right? where this is the number of years, right? so as x increases, one plus r gets larger, right? and changes in r matter more because you are putting more r's into the function, right? so what about three? a normal yield curve is downward sloping.
01:28
This is false.
01:32
Here's the correct answer...