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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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