Explanation

This question tests the concept of convexity in bond pricing. For option-free bonds, the price-yield relationship is convex, not linear. This means:

1. Price increases are greater than price decreases for equal yield changes in opposite directions
2. The price-yield curve is curved downward (convex to the origin)

Key Insight:

• When yields decrease by 200 bps, price increases by 5%
• Due to convexity, when yields increase by the same 200 bps, the price decrease will be less than 5%
• To get a 5% price decrease, yields must increase by more than 200 bps

Mathematical Explanation:

The convex price-yield relationship means:

• For a given yield decrease Δy, price increase = ΔP₁
• For the same yield increase Δy, price decrease = ΔP₂, where |ΔP₂| < |ΔP₁|
• To achieve |ΔP₂| = |ΔP₁|, you need a larger yield increase

Example with Numbers:

If decreasing yields by 200 bps gives +5% price change, then:

• Increasing yields by 200 bps might give only -4.5% price change (due to convexity)
• To get -5% price change, you need to increase yields by something like 220-230 bps

Therefore, the correct answer is C: more than 200 basis points.