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)There is not enough information to solve the question.

Question

Quizplus · Accepted Answer

To calculate the daily earnings at risk, we use the following formula:

Daily earnings at risk = Market value * Modified duration * Potential adverse move in yield

Plugging in the numbers, we get:

Daily earnings at risk = $100,000 * 3.30 * 16.5 / 10000

Daily earnings at risk = $544.50

Therefore, the answer is B) $544.50.

Assume the Market Value of a Position Is $100 000