A $1000 face, 10-year, 8.00 percent semi-annual coupon, option-free bond is issued at par (market rates are thus 8.00 percent). Given that the bond price decreased 10.03 percent when market rates increased 150 basis points (bp), which of the following statements is TRUE If market yields:（）
A. decrease by 150bp, the bond’s price will decrease by more than 10.03%.
B. decrease by 150bp, the bond’s price will increase by 10.03%.
C. decrease by 150bp, the bond’s price will increase by more than 10.03%.
参考答案：C
解析：
Because of positive convexity, bond prices rise faster than they fall. Positive convexity applies to both dollar and percentage price changes. For any given absolute change in yield, the increase in price will be more than the decrease in price for a fixed-coupon, noncallable bond. As yields increase, bond prices fall, and the price curve gets flatter, and changes in yield have a smaller effect on bond prices. As yields decrease, bond prices rise, and the price curve gets steeper, and changes in yield have a larger effect on bond prices. Here, for an absolute 150bp change, the price increase would be more than the price decrease.