Author Question: If the required rate of return on a bond (rd) is less than its coupon interest rate and will remain ... (Read 84 times)

ddddddddddeeee4444 · **on:** Aug 7, 2023

Question 1

For bonds with the same coupons, they have differential sensitivity to changes in interest. That is, the shorter the maturity of the bond, the more its price changes in response to a given change in interest rates.

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Question 2

If the required rate of return on a bond (r_d) is less than its coupon interest rate and will remain below that rate, then the market value of the bond will always be above its par value until the bond matures, at which time its market value will equal its par value. (Accrued interest between interest payment dates should not be considered when answering this question.)

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risolinick@gmail.com · **Reply #1 on:** Aug 7, 2023

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