chapter 7 - Name: Nguyen Thi Lan Thanh Student ID: 1236311...

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Name: Nguyen Thi Lan Thanh Student ID: 1236311 Class: Friday Morning CHAPTER 7 Questions 7.4/ If interest rates rise after a bond issue, what will happen to the bond’s price and its YTM? Does the time to maturity affect the extent to which interest rate change affect the bond’s price? (Again, an example might help you answer the question.) If interest rates rise after a bond issue, the bond’s price will fall and its YTM will rise. The time to maturity affect the extent to which interest rate change affect the bond’s price. If the bond still has a long term to maturity, its YTM will reflect long-term rates. Of course, the bond’s price will be less affected by change in interest rates if it has been outstanding a long time and mature shortly. While this is true, it should be noted that the YTM will increase only for buyers who purchase the bond after the change in interest rates and not the buyers who purchased previous to the change. If the bond is purchased and held to maturity, the bondholder’s YTM will not
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chapter 7 - Name: Nguyen Thi Lan Thanh Student ID: 1236311...

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