A bond has a modified duration of 5.87 years, a par value of $1,000, and a current market value of $1,008. What is the dollar value of an 01?

Question

Quizplus · Accepted Answer

01 represents the change in the bond's price due to a 1 basis point change in yield. 
Using the formula, 01 = (-MD) * (PV) * 0.0001, we get: 
01 = (-5.87) * (1008) * 0.0001 = -$0.5917 or -$59.17 
Therefore, the dollar value of an 01 is $0.5917 or approximately $0.59.

A Bond Has a Modified Duration of 5