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Understanding Bond Pricing Suppose your friend tells you that she recently purchased a 20 year $4,000,00 bond with a 5% coupon. A month latec, she
Understanding Bond Pricing Suppose your friend tells you that she recently purchased a 20 year $4,000,00 bond with a 5% coupon. A month latec, she saw it quoted at 97:12, but she does not know what this means. You can tell by the way the band is priced that she has a bond; otherwise it would have been priced You explain that the market price of her bond is now , meaning it is now a bond. Bused on the market price of the bond you calculated, you can tell that market interest rates have gone since the bond was issued. The current vietd of the bond is now
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