Answer: 6.34

## Explanation Effective duration measures the sensitivity of a bond's price to changes in interest rates. The formula for effective duration is: \[ \text{Effective Duration} = \frac{P_- - P_+}{2 \times P_0 \times \Delta y} \] Where: - \(P_-\) = Price when yields decrease by Δy = 96.35 - \(P_+\) = Price when yields increase by Δy = 92.75 - \(P_0\) = Initial price = 94.65 - \(\Delta y\) = Change in yield (in decimal) = 0.0030 (30 basis points) Plugging in the values: \[ \text{Effective Duration} = \frac{96.35 - 92.75}{2 \times 94.65 \times 0.0030} \] \[ \text{Effective Duration} = \frac{3.60}{2 \times 94.65 \times 0.0030} \] \[ \text{Effective Duration} = \frac{3.60}{0.5679} \] \[ \text{Effective Duration} = 6.34 \] Therefore, the effective duration of this bond is approximately 6.34, which corresponds to option B.

Author: LeetQuiz .