Consider a $100 par value bond. It has a 6% coupon
Consider a $100 par value bond. It has a 6% coupon paid annually and 10 years to maturity. The bond is valued at $102.08 today with a discount rate of 5.5%. One day later, the discount rate increases to 6.5%. Assuming the discount rate remains at 6.5% over the remaining life of the bond, the price of the bond between today and maturity will most likely:
A. Decline then remain unchanged.
B. Decline then rise.
C. Rise then decline.
参考解答
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2024-11-17 19:06:20
Ans:B;
B is correct because if the discount rate rises to 6.5% from 5.5%, the price of a bond declines. At a discount rate of 6.5%, the bond sells at a discount to face value. As a discount bond approaches maturity, it will rise in price over time until it reaches par at maturity.
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