Question

8 Suppose that the 10-year interest rate opens the day trading at 5.4578%. At the end of the day you read on the news that the 10-year interest rate closed the day 2 basis points lower. At what level did the 10-year interest rate closed the trading day? 5.4378% 5.2578% 5.4558% 3.4578%

Answer 1

Ans. Option a

1 basis point = 0.01%

So, a 2 basis point decrease in 10 year interest rate of 5.4578% = 5.4578 - 0.01*2 = 5.4378%

Thank you