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Consider the following conversation: John: Do you remember the bond I bought a while back at 94.35. I just looked at the market quote and
Consider the following conversation: John: Do you remember the bond I bought a while back at 94.35. I just looked at the market quote and it is trading now at 98.78 Sally: Yes, I do remember. Well done! Since the price rose, that meant the YTM must have fallen. Thats a good call on your part. John: Thanks. Given the bonus pool the firm has for making good trades, I think Im in good shape. Ive got my eye on a really nice boat. Is Sally correct that the reason the bond price rose is because the YTM fell? Explain.
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