U.S. Treasury quotes from the WSJ on Oct. 15, 2003:
-If yields increase by 10 basis points,what is the approximate price change on the $100,000 Treasury note? Use the duration approximation relationship.
A)+$179.39
B)+$16.05
C)-$1,605.05
D)-$16.05

Question

U.S. Treasury quotes from the WSJ on Oct. 15, 2003:  
-If yields increase by 10 basis points,what is the approximate price change on the $100,000 Treasury note? Use the duration approximation relationship.
A)+$179.39 
B)+$16.05 
C)-$1,605.05 
D)-$16.05

Quizplus · Accepted Answer

Note no semi-annual adjustment needed. Duration is measured in years. 11efb87c_c94d_5adc_9137_79f948504503_TB1314_00 The duration approximation relationship is:Price change = -Duration * Yield change * Face valueIn this case, the yield change is 10 basis points, or 0.1%, and the face value is $100,000. The duration of a Treasury note is typically around 5 years, so the price change would be:Price change = -5 * 0.1% * $100,000 = -$500However, the question asks for the approximate price change, so we can use the simplified duration approximation:Price change = -Yield change * Face valueIn this case, the price change would be:Price change = -0.1% * $100,000 = -$100Therefore, the approximate price change is -$100, which is closest to choice A, +$179.39.

US Treasury Quotes from the WSJ on Oct