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    Question

    Convexity in bonds

    explains:
    A Price changes linearly with interest Correct Answer Incorrect Answer
    B Default probability Correct Answer Incorrect Answer
    C Relationship between price and duration Correct Answer Incorrect Answer
    D Non-linear relationship of price and yield Correct Answer Incorrect Answer
    E Time to maturity Correct Answer Incorrect Answer

    Solution

    Convexity explains how bond price changes are not linear with changes in yield.

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