QUESTIONS 97 THROUGH 108 RELATE TO FIXED INCOME INVESTMENTS.
108. The bonds issued by ALS Corp. are currently priced at 108.00 and are option free. Based on a
portfolio manager’s valuation model, a 10 basis points rise in interest rates will result in the bond
price falling to 106.50 while a 10 basis points fall in interest rates will result in the bond price rising
to 110.00. The market value of the portfolio manager’s holdings of ALS bonds is $2 million. The
expected change in the market value of this holding for a 100 basis point change in interest rates
will be closest to:
A.
$124,000.
B.
$322,600.
C.
$645,200.