- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 2. Macaulay, Modified and Effective Durations

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**CFA Practice Question**

What is the interest rate risk, in percentage price change, of a semi-annual-pay 9%, 15-year bond with an 8.5% yield if rates increase by 60 basis points?

A. -4.80%

B. -4.55%

C. 4.80%

**Explanation:**Current Price = 104.19, Full Valuation = 99.19, % Change = -4.80%

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**User Contributed Comments**
5

User |
Comment |
---|---|

kalps |
Surely this is wrong becos 60 basis points is 0.06% as 100bp is 1% - am i wrong or what ?? |

kalps |
sorry ignore my last comment it is getting close to the exam and i am going mad !!! |

ilic26 |
where does current price and full valuation come from? can someone help? |

danlan |
First, with N=30, I=4.25, PMT=4.5, and FV=100, we get PV=-104.19 If we change I=4.55, then we get PV=-99.19 |

mpapwa22 |
Yap...Danlan is the man. Thts exactly what it is |