Explanation

For an option-free bond, convexity has the following effects:

• When yields decrease: The convexity adjustment increases the magnitude of the price change (makes it more positive)
• When yields increase: The convexity adjustment decreases the magnitude of the price change (makes it less negative)

This is because convexity measures the curvature of the price-yield relationship. For option-free bonds, convexity is positive, which means:

• Bond prices rise more than predicted by duration alone when yields fall
• Bond prices fall less than predicted by duration alone when yields rise

Therefore, the correct answer is:

• Decrease in Yield: Increase in magnitude
• Increase in Yield: Decrease in magnitude