What is the formula for calculating PVBP of a bond portfolio with a market value of $10 million and a duration of 6?

The present value basis point (PVBP) measures the change in the value of a bond portfolio for a one basis point (0.01%) change in yield. The formula accounts for the market value of the portfolio and its duration, which indicates the sensitivity of the bond's price to interest rate changes.

The correct approach to calculate PVBP involves multiplying the market value of the portfolio by its duration and then dividing by 10,000, as one basis point equals 0.01%. This reflects how much the portfolio's value will change with a one basis point move in yield.

In this case, with a market value of $10 million and a duration of 6, the calculation would correctly be:

PVBP = (Market Value x Duration) / 10,000

Applying this to the given values results in:

PVBP = ($10 million x 6) / 10,000.

This formula effectively captures both the size of the investment (in monetary terms) and its sensitivity to interest rates (as indicated by duration). Thus, using this formula correctly provides insight into the potential risk and changes in value the bond portfolio might experience due to shifts in interest rates.

The remaining options do not align with this standard calculation method. For