9-96 If interest rates increase by 20 basis points,what is the approximate change in the market price using the duration approximation?
A)-$7.98.
B)-$7.94.
C)-$3.99.
D)+$3.99.
E)-$7.94

Question

Quizplus · Accepted Answer

The correct answer is A because the duration approximation formula is: ΔP = -D * Δr, where ΔP is the change in price, D is the duration, and Δr is the change in interest rates. In this case, the duration is 9, the change in interest rates is 0.2%, and the change in price is -9 * 0.2% = -$1.80.

9-96 If Interest Rates Increase by 20 Basis Points,what Is