A 5-year 5% Bond has a Basis Point Value (BPV) of ₹50. How much the bond will gain or lose due to increase in the yield of bond by 2 bps?
CS Professional · Banking - Law & Practice · PYQS · December 2021
A 5-year 5% Bond has a Basis Point Value (BPV) of ₹50. How much the bond will gain or lose due to increase in the yield of bond by 2 bps?
Answer & Explanation:
Increase in yield will affect the bond adversely and the bond will lose. Since Basis Point Value (BPV) of the bond is ₹50/-. Increase in yield by 2 bps will result into loss of value of Bond by 50 * 2 = 100. Loss of Value by ₹100 .
Topics: Financial Markets
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