The price value of a basis point (PVBP) of a bond portfolio is $45,000. Expected changes in interest rates over the next year are summarized below:
| Change in Interest rates |
Probability |
| >+1.50% |
1% |
| +1.00-1.49% |
29% |
| 0.00-0.99% |
20% |
| -0.99-0.00% |
45% |
| <-1.00% |
5% | What is the value at risk (VAR) for the bond portfolio at a 99 percent confidence level?
A. $2,250,000.
B. $4,500,000.
C. $6,750,000.
D. $7,850,500.
|
