Assume the market value of a position is $100 000 and that its modified duration is 3.30 years. Further assume that the potential adverse move in yield is 16.5 basis points. What are the daily earnings at risk for this position (round to two decimals)?
A) $54.45
B) $544.50
C) $54 450.00
D) Not enough information to solve the question.

Question

Quizplus · Accepted Answer

Daily earnings at risk (DEAR) = Market value x Modified duration x Potential adverse move in yield / 10000
DEAR = $100,000 x 3.30 x 16.5 / 10,000 = $544.50, rounded to two decimals. Therefore, the best answer is B.

Assume the Market Value of a Position Is $100 000