190k views
3 votes
If the current interest rate is 5% and your semi-annual coupon paying bond has a duration of 5.33 years, how much will the price of the bond change if the interest rate increases by 1 basis point?

User Erykah
by
8.0k points

1 Answer

5 votes

Answer:

Percentage change in price = -5.33 * 0.00005

Step-by-step explanation:

Percentage change in price = - modified duration * (Change in yield in BP/100)

Percentage change in price = -5.33 * ((0.01/2)/100)

Percentage change in price = -5.33 * (0.005/100)

Percentage change in price = -5.33 * 0.00005

User John Biesnecker
by
7.5k points

No related questions found

Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.