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

Question

4 years ago

8

of the bond change if the interest rate increases by 1 basis point?

1 answer:

Serhud [2] · Answer 1 · 2021-12-01T04:40:19+03:00

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