Price Value Basis Point

The CFA Level I book states that PVBP can be solved by multiplying ModDur by the Full Price of the bond and then multiplying to 0.0001 (a basis point).

However, this just doesn’t compute for me. If ModDur is the change in the price of a bond due to a 1% (100 bp) change in the yield, a 1 bp change should be 1% of that value. In other words, I view the calculation as .01ModDurFull Price of the Bond.

Can someone explain what I am missing?

I bet that it does.

Let’s try a series of experiments.

Suppose that you have a bond with a modified duration of 7 years. If the bond’s yield increases 1%, and we ignore convexity, by how much do you expect the bond’s price to fall?