The situation
A bond holding is worth ₹50 crore and has modified duration 5.2. Yield rises 35 basis points.
Your task
Estimate the change in price and holding value.
Reveal step-by-step solution
Set up the problem
Convert 35 basis points to 0.0035 in decimal yield units.
Work through the numbers
Estimated price change = −5.2 × 0.0035 = −1.82%. Holding loss ≈ 1.82% × ₹50 crore = ₹0.91 crore.
Interpret the result
Estimated value is ₹49.09 crore. Reprice fully for larger moves or when convexity and optionality matter.
What to remember
Use modified duration for sensitivity and convert basis points before multiplication.