Cord cutting, a video company, provides services across the US, issued a 20 year bond five years ago. What will happen to CC bond price if the demand for video streaming increases compared to expectations 5 years ago? What will happen to CC bond price if inflation forecasts decrease from 4% to 1% compared to 5 years ago?
Cord cutting, a video company, provides services across the US, issued a 20 year bond five years ago. What will happen to CC bond price if the demand for video streaming increases compared to expectations 5 years ago? What will happen to CC bond price if inflation forecasts decrease from 4% to 1% compared to 5 years ago?
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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Question
Cord cutting, a video company, provides services across the US, issued a 20 year bond five years ago. What will happen to CC bond price if the demand for video streaming increases compared to expectations 5 years ago? What will happen to CC bond price if inflation forecasts decrease from 4% to 1% compared to 5 years ago?
Expert Solution
Step 1
The yield on the bonds issued by CC will decrease due to an increase in its business. Since yield and price are inverse;y related, the price of CC bond price will increase.
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