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Norma-Jean [14]
4 years ago
8

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?
Business
1 answer:
Serhud [2]4 years ago
7 0

Answer:

Percentage change in price = -5.33 * 0.00005

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

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