Consider a Security with a Duration of 2

Multiple Choice

Consider a security with a duration of 2.78 years. The current interest rate level is 10 per cent p.a. How does the price of the security change if interest rates decrease by 100 basis points (round to two decimals) ?

A) The price of the security will decrease by 1 per cent.
B) The price of the security will increase by 1 per cent.
C) The price of the security will decrease by 2.50 per cent.
D) The price of the security will increase by 2.50 per cent.