Suppose a 10 year bond is issued with an annual coupon rate of 8 percent when the market rate of interest is also 8 percent. If the market rate rises to 9 percent, what happens to the price of this bond? What happens to the bond s price if the market rate falls to 6 percent? Explain why.
Suppose a 10 year bond is issued with an annual coupon rate of 8 percent when the market rate of interest is also 8 percent. If the market rate rises to 9 percent, what happens to the price of this bond? What happens to the bond s price if the market rate falls to 6 percent? Explain why.
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