Which bond's price would be most affected by a yield increase of 20 basis points?

The price of a bond is inversely related to changes in interest rates; when yields increase, bond prices tend to decrease. The extent to which the price of a bond is affected by changes in yield is known as its duration. Generally, bonds with longer maturities and lower coupon rates have higher durations, meaning they are more sensitive to interest rate changes.

In this scenario, the bond identified as D would typically have the highest duration among the options presented. It could be due to it having a longer maturity or a lower coupon rate, both characteristics that enhance sensitivity to yield changes. Thus, a 20 basis point increase in yield would lead to a more significant decrease in the price of this particular bond compared to others with shorter durations or higher coupon rates.

Understanding that duration measures interest rate risk helps clarify why bond D exhibits the most substantial price change in response to a yield increase.