**A**

- Yield: Nper = 15*2, Pmt=10%*100, PV=-125.50, FV=100, leads to Rate=3.6%*2 = 7.2%
- Modified Duration: With Excel's MDuration, Settlement = "January 1, 2005", Maturity = "January 1, 2020" (any dates would do as long as maturity is 15 years), Coupon = 10%, Yield = 7.2%, Frequency = 2, leads to 8.50.
- PVBP = Duration x Bond Price / 100^2 = $0.11

Another approach is to raise the yield by 1 basis point, then solve using PVBP = abs( initial price - PV(7.21%) ).

*Followup Question*: assume in the above example that the market interest rate is expected to shoot up by 200 basis points, what is the expected change in bond price?

-8.50 * 2% = -17%

*Category: C++ Quant > Debt > Valuation*

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