You own a $15 million bond portfolio with a modified duration of 11 years. Interest rates are expected to increase by 5 basis points, or 0.05%. What is the price value of a basis point?
A) $10,400
B) $14,300
C) $16,500
D) $21,300

Question

Quizplus · Accepted Answer

The change in the portfolio's yield will be D* Δy = 11 × 0.05% = 0.55%. The change in the portfolio's value will be 0.55% × $15 million = $82,500. PVBP = Change in portfolio value ÷ Predicted change in yield = $82,500/5 basis points = $16,500.

You Own a $15 Million Bond Portfolio with a Modified