Consider two bonds. Each has a face value of $100 and matures in 10 years. One has

Question:

Consider two bonds. Each has a of $100 and matures in 10 years. One has no payment, and the other pays $10 per year.
a. Calculate the price of each bond if the interest rate is 3 percent and if the interest rate is 6 percent.
b. When the interest rate rises from 3 percent to 6 percent, which bond price falls by a larger percentage? Explain why.
Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...