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crismurray

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  • in reply to: PVBP #169579
    Avatar of crismurraycrismurray
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      • CFA Level 1
      05 Oct 2023 at 9:42 am
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      You are correct. The calculation provided in the explanation is incorrect, and it should indeed be 3.001 as a 1 basis point (0.01%) increase in yield. Let’s recalculate the PVBP using the correct values according to uno online guides:

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

      Initial price:
      FV = $1,000
      PMT = $50 (semiannual coupon payment)
      N = 14 (number of periods)
      I/Y = 3% (yield)
      CPT PV = $1,225.92

      Price if yield changed by 1 bps:
      FV = $1,000
      PMT = $50
      N = 14
      I/Y = 3.001% (yield increased by 1 bps)
      CPT PV = $1,225.28

      PVBP = $1,225.92 – $1,225.28 = $0.64

      Therefore, the correct PVBP for the bond is closest to $0.64.

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