Finance - Bonds

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gvyylorr

Business Finance

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There is an inverse relationship between bond prices and yields. This inverse relationship will be demonstrated by calculating bond prices to show that interest rates move inversely: if yields rise, then bond prices fall. Bonds will be sold either at a premium or a discount. With this in mind respond to the following question.

You currently own a 30 year Treasury Bond paying a 4% annual coupon rate. The market interest rates for like securities rose to 5%. Would your bond sell for a premium or a discount? Why?

What would the market value of your bond be? Prove your answer by showing your work, the appropriate factors, or the factors that would be used for the fx calculator.

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Finance
1.
When the coupon Rate is pegged at 4%, Market Interest rates rose to 5%, so the bond will
be sold for a discount. The reason is if the market interest rate rises then the value of the bond
will decline. Assume you invested $1000 in the Treasury bond when you create the cash flow
stream of 59 periods of $20...


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