Question

Measures the "second order" effect on a bond's percentage price change given a change in yield-to-maturity:

a) Macaulay duration
b) Modified duration
c) Key rate duration
d) Convexity

Answer 1

Convexity is the measure that assesses the second order effect on a bond's price change given a change in yield-to-maturity.

Step-by-step explanation:

The measure that assesses the "second order" effect on a bond's percentage price change given a change in yield-to-maturity is Convexity. Convexity is a risk-management measure that determines the sensitivity of a bond's price to changes in its yield. It takes into account the curvature of the bond's price-yield relationship and provides a more accurate representation of the bond's price change.