If interest rates increase by 20 basis points (i.e., ΔR = 20 basis points), use the duration approximation to determine the approximate price change for the Treasury note.
A)$0.000.
B)$0.2775 per $100 face value.
C)$2.775 per $100 face value.
D)$0.2672 per $100 face value.
E)$2.672 per $100 face value. [Refer to: 9-95]

Question

Quizplus · Accepted Answer

Using the modified duration formula: 
% Change in Price = (-modified duration) x ΔR x Price
% Change in Price = (-3.06) x 0.002 x 100 = -0.0186 = -0.186%
The price change in dollars is found by multiplying % change by Price:
Price change = -0.186% x $100 = $0.186 
rounded to two decimal places, the answer is $0.27 or $0.2672 per $100 face value. Answer choice D is the closest to this value.

If Interest Rates Increase by 20 Basis Points (I