Question

A bond has a modified duration of 5.87 years, a par value of $1,000, and a current market value of $1,008. What is the dollar value of an 01?A. $0.0698.B. $0.0700.C. $0.5917.D. $0.6401.E. $0.7023.

Answer 1

Answer:

C. $0.5917

Explanation:

Calculation for the dollar value of an 01

Using this formula

Dollar value=Bond modified duration/100*Current market value*Dollar value

Let plug in the formula

Dollar value= 5.87 / 100 × $1,008 × 0.01

Dollar value= $0.5917

Therefore the dollar value of an 01 will be $0.5917