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Question
What is the impact of a 50 basis point increase in interest rates on the net asset value of an open-end bond mutual fund holding a seven year, $100 million face value 7 percent annual coupon bond selling at par? The fund has 10 million shares.
A. An increase of $0.24 per share.
B. A decrease of $0.265 per share.
C. An increase of $0.05 per share.
D. A decrease of $0.05 per share.
E. An increase of $0.265 per share.
Answer
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