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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 .05%. what is the price value of a basis point?

Respuesta :

W0lf93
given: 
Amount won: $15 million bond portfolio. 
duration: 11 years.
 solution:
 The change in the portfolio's yield will be D* Δy = 11 Ă— .05% = .55%. 
 The change in the portfolio's value will be .55% Ă— $15 million = $82,500. 
 PVBP = Change in portfolio value Ă· Predicted change in yield = $82,500/5 
 value of basis points = $16,500.

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