Jimmy James, CFA has been tasked with estimating the interest rate risk of a bond using duration. The current price is 83. An internal computer valuation model has predicted that if interest rates decline by 25 basis points, the price will increase to 85 and if interest rates increase by 25 basis points the price will decline to 81. The duration of this bond is closest to? A 10 B 11 C 12 D 13
you can also do it as % change in price: (85-83)/83=2.41% change in price for 25 basis points, that’s a 2.41*4=9.64 for 100 basis points.