- The "price value of a basis point" (PVBP) measure changes by one basis point (one one-hundredth of a percent-0.01%). PVBP is expressed as the absolute value of the change in price. Consider a coupon bond with a face value of $100,000, an annual coupon rate of 10% and that matures in 5 years. What is PVBP if the yield rises from 10% to 10.01%? The PVBP if the yield rises from 10% to 10.01% is $ (Round to the nearest cent.)
- The "price value of a basis point" (PVBP) measure changes by one basis point (one one-hundredth of a percent-0.01%). PVBP is expressed as the absolute value of the change in price. Consider a coupon bond with a face value of $100,000, an annual coupon rate of 10% and that matures in 5 years. What is PVBP if the yield rises from 10% to 10.01%? The PVBP if the yield rises from 10% to 10.01% is $ (Round to the nearest cent.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Concept explainers
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
Question
Transcribed Image Text:. The "price value of a basis point" (PVBP) measures the change in the price of a bond if the yield
changes by one basis point (one one-hundredth of a percent-0.01%). PVBP is expressed as the
absolute value of the change in price. Consider a coupon bond with a face value of $100,000, an
annual coupon rate of 10% and that matures in 5 years. What is PVBP if the yield rises from 10%
to 10.01%?
(Round to the nearest cent.)
The PVBP if the yield rises from 10% to 10.01% is $
A newly issued U.Ss. Federal T-Note matures in exactly 5 years. The coupon rate is 3% per year
and coupons are paid semiannually. The bond is priced at 104.79 (per $100 of face value) and
yields 1.99%. The economy is slowing and many forecasters predict a recession. You expect that
the monetary authorities will relax monetary policy which will cause interest rates to fall. You expect
the yield on the 5-year bond to fall to 0.24%. The bond has a face value of $1M. If you want to
earn $1M by investing in bonds to profit from the interest rate change, how many bonds do you
buy?
In order to earn $1M by investing in bonds, you need to buy
the nearest whole number.)
bonds. (Round up to
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education