Calculate the Bond Portfolio PVBP based on the given data: Par Value*******Mkt. Price*******Eff. Duration $2M***********100************8 $3M***********93*************1.5
Is it $2,018.5?
is it $2050?
map1 Wrote: ------------------------------------------------------- > Is it $2,018.5? Yes, it is $2018.49 round it up --> $2018.5. Thx to confirm about it.
would you explain how to reach this result? Thanks!
The PVBP (price value of a basis point) is the dollar duration in price for a change of 1 basis point in yield: Bond A: 0.0001*100*8=0.08. Bond A is 2/5 of the portfolio, that would be a (0.08*2mil)/100=$1,600 change in the portfolio price given a 1bp change in the yield of bond A. Bond B: 0.0001*93*1.5=0.01395. Bond A is 3/5 of the portfolio, that would be a (0.01395*3mil)/100=$418.5 change in the portfolio price given a 1bp change in the yield of bond B. Overall, the entire change in the portfolio would be $1,600+$418.5=$2,018.5 change, given a 1bp change in the yield of both bonds.
I did it a bit differently but the result is the same. Portfolio Duration = weight A x Duration A + weight B x Duration B weight A = 2/4.79; weight B = 2.79/4.79 and Duration A & B are given in table. --> Portfolio Duration = 2/4.79 x 8 + 2.79/4.79 x 1.5 = 4.2140 Portfolio PVBP = Portfolio Duration x Total Mkt Value x 1bp = 4.2140 x 4,790,000 x 0.01% = $2018.50