To add $1,000 PVBP to a bond portfolio of $10 million, the first calculation involves which of the following?

To add a specific amount of present value basis points (PVBP) to a bond portfolio, it is necessary to understand how PVBP relates to both the portfolio's duration and its overall market value. PVBP measures the change in the present value of a bond portfolio for a 1 basis point (0.01%) change in yield.

Calculating the first step to achieve an increase of $1,000 in PVBP involves understanding that the desired increase needs to be adjusted based on the portfolio's duration.

The formula for PVBP is typically structured in a way that relates it to both the amount of change and the duration of the portfolio:

PVBP = (Change in Price / Change in Yield) * Portfolio Duration

In this context, to achieve the desired increase in PVBP, you need to determine the required change that will produce the incremental $1,000 in present value basis points from the duration of the existing portfolio.

By choosing the formula that incorporates the duration of the portfolio, you can correctly evaluate how much of a yield change will be needed in order to adjust the total PVBP accordingly. Thus, the relationship between the present value change desired, the amount to be added, and the duration is central to calculating how to achieve