A bond position has a PV01 of €50.Its yield is currently 11%.Calculate the change in the value of the bond position if the yield drops to 10.5%.

Question

Quizplus · Accepted Answer

PV01 measures the change in the value of a bond for a 1 basis point change in yield. In this case, the PV01 is €50, which means that if the yield drops by 1 basis point, the value of the bond will increase by €50. If the yield drops from 11% to 10.5%, this represents a change of 5 basis points. Therefore, the value of the bond will increase by 5 * €50 = €250.

A Bond Position Has a PV01 of €50