# Feb 2024 CFA Boston mock 2 session 2, set 4, question B - why *0.01% in calculating money duration?

Rios examines an alternate fixed income portfolio from Green Square Partners, composed solely of government-issued bonds. The firm utilizes this portfolio to immunize its debt liabilities. The portfolio has a market value of \$77.7 million and a modified duration of 4.2. In contrast, Green Square’s liability has a market value of \$82.4 million with a modified duration of 5.1. The futures contract, designed to bridge this gap, has an estimated basis point value (BPV) of \$88.12.

B. Calculate the money duration metrics for Green Square’s assets and liabilities.

Part B
LOS: Volume 2, Learning Module 5, Section 4, Evaluate liability-based strategies under various interest rate scenarios and select a strategy to achieve a portfolio’s objectives.
BPV = MDUR × 0.01% × MV
BPV for the liabilities: \$82.4 million × 5.10 × 0.01% = \$42,024
BPV for the assets: \$77.7 million × 4.20 × 0.01% = \$32,634
Reference: 2024, Fixed Income, Volume 2, Learning Module 5, Section 4, Managing the Interest Rate Risk of Multiple Liabilities, p. 319

You are calculating BPV not money duration (one is just a scalar of the other)

Price value of a basis point BPV is the move for 1 basis point.
BPV tells you move in portfolio for 1bp mov in rates

Money duration = Mkt value x duration x 0.0001 = 82.4m x 5.1 x 0.0001 = 42,024

42/024 / 82.4m = 0.051%
This is what you would expect.
A 1% chnage in yield = 5.1% chnage in value
A 0.01% chnage in in yield = 0.051% change in value