CFA Level I · CFA Level I Exam · Yield-Based Bond Convexity and Portfolio Properties
A bond has a full price of 98.50 per 100 par, with an annual modified duration of 4.80. Ignoring convexity, the price value of a basis point (PVBP) per 100 of par is closest to:
PVBP is approximately modified duration times full price times 0.0001: 4.80 × 98.50 × 0.0001 = 0.0473 per 100 of par. This is the price change for a one basis point move in yield, so 0.0473 is the closest option.
- A0.0047
- B0.0473Correct
- C0.4728
Explanation
PVBP ≈ modified duration × price × 0.0001 = 4.80 × 98.50 × 0.0001 = 0.04728. The 0.4728 option uses 0.001 (10 bps), and 0.0047 uses 0.00001.
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