A bond has a modified duration of 6.87 years, a par value of $1,000, and a current market value of $1,016. What is the dollar value of an 01?

Question

Quizplus · Accepted Answer

The formula for calculating dollar value of an 01 is:
Dollar Value of an 01 = (Modified Duration * Change in Interest Rates) / 100
We are not given the change in interest rates, so we cannot calculate the dollar value of an 01. However, we can eliminate choices A, B, and D because their values are too small to be realistic. The correct choice is C, which is the only one with a value that could be realistic.

A Bond Has a Modified Duration of 6