- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 3. Properties of Bond Duration
CFA Practice Question
A 10 year, 8% coupon bond has a price of 97.21 of 100 par. If its effective duration is 4.9 and the yields increase by 0.35%, what is the bond's new price, as estimated by its duration?
A. 95.54
B. 98.12
C. 98.88
Explanation: The percentage price change %ΔP = -4.9 * 0.0035 = -1.715%
The estimated price: P1 = P0 (1 + %ΔP) = 97.21 (1 - 0.01715) = 95.54
User Contributed Comments 1
| User | Comment |
|---|---|
| bhaynes | No math even necessary, if the rates increase than the price must decrease. Answer A is the only valid option here. |