［2008］Topic 28: One-Factor Measures of Price Sensitivity相关习题 security, interpret, currently

Baran

AIM 1: Define and compute the dollar value of a basis point (DV01) of a fixed income security, and interpret DV01 of a fixed income security, given a change in yield and the resulting change in price.

 

1、The price value of a basis point for a 7% coupon, semiannual pay, 10-year bond with a $1,000 par value, currently trading at par, is closest to:

A) $0.71.
 
B) $1.42.
 
C) $67.10.
 
D) $33.55.

Baran

The correct answer is A 

The price value of a basis point is the price given a 1 basis point change in the discount rate.
N = 20; PMT = 35; FV = 1,000; I/Y = 7.01/2 = 3.505; CPT → PV = 999.29
$1,000 – $999.29 = $0.71.

Baran

2、The price value of a basis point (PVBP) for a 7-year, 10 percent semiannual pay bond with a par value of $1,000 and yield of 6 percent is closest to:

A) $0.28.
 
B) $0.92.
 
C) $0.00.
 
D) $0.64.

Baran

The correct answer is D

 

PVBP = initial price – price if yield changed by 1 bps.

Initial price:                                 Price with change:
 
FV = 1000                                   FV = 1000
 
PMT = 50                                    PMT = 50
 
N = 14                                        N = 14
 
I/Y = 3%                                     I/Y = 3.005
 
CPT PV = 1225.92                  CPT PV = 1225.28
 

PVBP = 1,225.92 – 1,225.28 = 0.64
PVBP is always the absolute value.

Baran

3、The price value of a basis point (PVBP) for a 18 year, 8 percent annual pay bond with a par value of $1,000 and yield of 9 percent is closest to:

A) $0.44.
 
B) $0.82.
 
C) $0.63.
 
D) $0.80.
 

Baran

The correct answer is B

 

PVBP = initial price – price if yield changed by 1 bps.

Initial price:                                  Price with change:
 
FV = 1000                                    FV = 1000
 
PMT = 80                                     PMT = 80
 
N = 18                                          N = 18
 
I/Y = 9%                                       I/Y = 9.01
 
CPT PV = 912.44375               CPT PV = 911.6271
 

PVBP = 912.44375 – 911.6271 = 0.82
PVBP is always the absolute value.

Baran

4、The price value of a basis point (PVBP) of a bond is $0.75. If the yield on the bond goes up by 1 bps, the price of the bond will:

A) increase by $0.75.
 
B) increase or decrease by $0.75.
 
C) decline by $0.75.
 
D) is less volatile than a bond with a PBVP of $0.50.

Baran

The correct answer is C

Inverse relationships exist between price and yields on bonds. The larger the PVBP, the more volatile the bond’s price.

Baran

5、For a given bond and yield, the dollar value of a one basis point change in yield is typically:

A) greater for a yield increase.
 
B) equal for a yield increase and decrease.
 
C) unrelated to the bonds convexity.
 
D) greater for a yield decrease.

Baran

The correct answer is D

When you calculate the dollar value of a basis point for a 1bp uptick and 1 bp downtick, it is greater for a yield decrease. This is a function of bond convexity.