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Suppose a 10-year, 6% coupon bond is issued, and one year later similar bonds are issued paying 5.85% coupons. What will happen to the market
Suppose a 10-year, 6% coupon bond is issued, and one year later similar bonds are issued paying 5.85% coupons. What will happen to the market value of the first bond?
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The first bond's value will fall very much
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The first bond's value will fall slightly.
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Since it is a 10-year bond, its maturity is not long enough for the value to change.
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The first bond's value will rise slightly
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