Three months ago you purchased, at par, a $100,000 bond with a stated interest rate of 5 Today, the Federal Reserve announced that it is reducing the discount rate by 0 5 How would you expect this announcement to affect the value of your bond Explain your response ...

Computation of the following The effect of discoun ...

Three months ago you purchased, at par, a $100,000 bond with a stated interest rate of 5%.

Question:

Three months ago you purchased, at par, a $100,000 bond with a stated interest rate of 5%. Today, the Federal Reserve announced that it is reducing the by 0.5%. How would you expect this announcement to affect the value of your bond? Explain your response.

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal...