{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

15.2 - BONDS PART 2 PAR Interest Rates Decrease Initially...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
BONDS PART 2
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
PAR
Background image of page 2
Interest Rates Decrease Initially pay $10,000 for bond when interest rates are 10% If interest rates decrease to 8% WOULD THIS BE AN ATTRACTIVE BOND? WOULD YOU PAY MORE THAN $10,000 FOR THIS BOND?
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Interest Rates Decrease
Background image of page 4
Interest Rates Decrease ANSWER: Yes! This bond becomes more attractive when interest rates fall and a buyer would be willing to pay more than $10,000 for it This is because this bond now has a coupon rate higher than the market so it trades at a premium
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Interest Rates Increase Initially pay $10,000 for bond when interest rates are 10% If interest rates increase to 12% WOULD THIS BE AN ATTRACTIVE BOND? WOULD YOU PAY MORE OR LESS THAN $10,000 FOR THIS BOND?
Background image of page 6
Interest Rates Rise
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Interest Rates Increase ANSWER: No! This bond becomes less attractive when interest rates rise and a buyer would not be willing to pay more than $10,000 for it This is because this bond now has a coupon rate lower than the market so it trades at a discount
Background image of page 8
Long vs. Short-term Bonds
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}