For the Yorkville bond:
Percentage price change = (-8.51 × 0.010 × 100) + (46.0 × 0.0102 × 100)
Percentage price change = -8.51 + 0.46
Percentage price change = -8.05
Reynaldo’s statement is incorrect.
To calculate the dollar value of an 01 we need to know the price of the bond if interest rates rise (or fall) by 1 basis point:
N = 24; PMT = (0.059 coupon × $1,000 par value / 2 payments per year =) 29.50; FV = 1,000
If rates rise by 1 basis point, I = ((5.90 + 0.01 =) 5.91% / 2 payments per year =) 2.955%; PV = -999.149, for a price of 99.915.
PVBP = 100 – 99.915 = 0.085
Campbell’s statement is also incorrect.
