CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

Cindy Bolan has an 11.00%, 9.00 bond that is selling for a price of $140.3830 and is currently yielding 5.30%. The table below shows how the price will vary given a one basis point change in market interest rates with a modified duration of 6.28. In this instance, what is the Price Value of a Basis Point (PVBP)?

A. $0.0882
B. $0.0705
C. $0.1146
Explanation: The formula for the Price Value of a Basis Point (PVBP) is equal to:
modified duration * (.0001) * 100 * price = 0.0628% * the initial price of 140.3830

Another approach is to use PV- and PV+: PVBP = (140.4712 - 140.2949)/2 = 0.0882

User Contributed Comments 2

User Comment
atemple315 I took the New Price with one Basis Point Increase - the New Price with one Basis Point Decrease and divided this by 2 and got the same answer. Was this also a way to find the answer, or just luck?
angusmyers That's what they do when they say "Another approach is to use ..."
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