Duration Price Sensitivity

The duration approximation is $\%\Delta P\approx -D\times \Delta y$.

Convert 20 basis points to decimal form (0.0020) before multiplying.

1. 1. Apply the duration approximation

   $\%\Delta P\approx -D\times \Delta y=-5\times 0.0020$.

   $$\%\Delta P\approx -5\times 0.0020=-0.01$$

2. 2. Conclude

   The bond price is expected to fall by approximately 1%.

Answer: -1%