A $1,000 bond with a coupon rate of 6.7% paid semiannually has ten years to maturity and a yield to maturity of 6.2%. If interest rates fall and the yield to maturity decreases by 0.8%, what will happen to the price of the bond? O rise by $62,59 O fall by $75.11 O rise by $87.62 O fall by $62.59

A $1,000 bond with a coupon rate of 6.7% paid semiannually has ten years to maturity and a yield to maturity of 6.2%. If interest rates fall and the yield to maturity decreases by 0.8%, what will happen to the price of the bond? O rise by $62,59 O fall by $75.11 O rise by $87.62 O fall by $62.59

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A $1,000 bond with a coupon rate of 6.7% paid semiannually has ten years to
maturity and a yield to maturity of 6.2%, If interest rates fall and the yield to maturity
decreases by 0.8%, what will happen to the price of the bond?
O rise by $62.59
O fall by $75.11
rise by $87.62
O fall by $62.59

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