- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 5. Money Duration of a Bond and the Price Value of a Basis Point
CFA Practice Question
What is the duration estimate of the dollar price change for a 7%, 5-year bond with a modified duration of 4.158, selling at 100, when the yield changes by one basis point?
A. 0.04158
B. 0.2915
C. 4.158
Explanation: Approximate percentage price change = 4.158(.0001)(100) = .04158%
Approximate dollar price change =.04158%(100) = $.04158
Approximate dollar price change =.04158%(100) = $.04158
User Contributed Comments 3
| User | Comment |
|---|---|
| jackwez | %duration loss per 100 basis points... |
| Xocrevilo | First part of the answer is same as the calc for PVBP (i.e. price value of a basis point) = (modified) duration x 1 basis point x bond price. Correct? |
| kellyyang | I think so, I used the PVBP formula to obtain the answer! |