Answer: CNY 19.11

## Explanation Forward Bucket '01 measures the change in bond price when forward rates in a specific bucket shift upward by 1 basis point (0.01%). ### Step 1: Calculate the bond's cash flows - **Year 1**: Coupon = 5% × CNY 100,000 = CNY 5,000 - **Year 2**: Coupon = CNY 5,000 - **Year 3**: Coupon + Principal = CNY 5,000 + CNY 100,000 = CNY 105,000 ### Step 2: Calculate present value using forward rates With flat forward rate curve at 3%: - **PV(CF₁)** = CNY 5,000 / (1.03) = CNY 4,854.37 - **PV(CF₂)** = CNY 5,000 / (1.03)² = CNY 4,712.98 - **PV(CF₃)** = CNY 105,000 / (1.03)³ = CNY 96,194.17 **Total PV** = CNY 4,854.37 + CNY 4,712.98 + CNY 96,194.17 = CNY 105,761.52 ### Step 3: Calculate Forward Bucket '01 for 2-3 year bucket We shift forward rates in the 2-3 year bucket upward by 1 bp: - Forward rate from year 2 to 3 increases from 3% to 3.01% **New PV calculation:** - PV(CF₁) unchanged = CNY 4,854.37 - PV(CF₂) unchanged = CNY 4,712.98 - PV(CF₃) = CNY 105,000 / [(1.03)² × (1.0301)] = CNY 105,000 / (1.0609 × 1.0301) = CNY 105,000 / 1.0928 = CNY 96,175.07 **New Total PV** = CNY 4,854.37 + CNY 4,712.98 + CNY 96,175.07 = CNY 105,742.42 ### Step 4: Calculate Forward Bucket '01 Forward Bucket '01 = Original PV - New PV = CNY 105,761.52 - CNY 105,742.42 = CNY 19.10 This matches option B (CNY 19.11, with minor rounding difference). **Key Insight**: Forward Bucket '01 isolates the sensitivity to forward rates in a specific time bucket, unlike DV01 which measures sensitivity to parallel shifts in the entire yield curve.

Author: LeetQuiz .