2) You find bond A priced to yield 6%, and a similar-risk bond B priced to yield 6.5%. If you expect the interest rates to rise, what will happen to the prices of the two bonds (increase or fall)? In terms of price change, which bond's price is expected to increase or fall more, and which bond's price is expected to increase or fall less?
2) You find bond A priced to yield 6%, and a similar-risk bond B priced to yield 6.5%. If you expect the interest rates to rise, what will happen to the prices of the two bonds (increase or fall)? In terms of price change, which bond's price is expected to increase or fall more, and which bond's price is expected to increase or fall less?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:2) You find bond A priced to yield 6%, and a
similar-risk bond B priced to yield 6.5%. If you expect
the interest rates to rise, what will happen to the prices
of the two bonds (increase or fall)? In terms of price
change, which bond's price is expected to increase or
fall more, and which bond's price is expected to
increase or fall less?
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