Suppose that you have a bond with a face value of $1,000 and a coupon rate of 8% for one year and that you buy
Suppose that you have a bond with a face value of $1,000 and a coupon rate of 8% for one year and that you buy another one after one year.
a- What will be your gain if the interest rate increases up to 10%? Compute annual return.
b- How will your answer change if the interest rate falls to 6%? Compute annual return.
c- What conclusion can you draw from these cases?
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Authors: Judith J. Baker, R.W. Baker
4th Edition
1284029867, 978-1284029864
