Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then O the face value of your bond is lower. people can offer a lower price to buy your bond today. the interest rate you are earning from this bond is lower. you will receive the same amount of coupon payments from the issuer while you are holding the bond. your return on this bond will be higher later when you hold it to the maturity date.

Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then O the face value of your bond is lower. people can offer a lower price to buy your bond today. the interest rate you are earning from this bond is lower. you will receive the same amount of coupon payments from the issuer while you are holding the bond. your return on this bond will be higher later when you hold it to the maturity date.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Last year you purchased a bond with an interest rate of 5 percent. Now the interest rate on the bond market drops to 4%. Then
the face value of your bond is lower.
people can offer a lower price to buy your bond today.
the interest rate you are earning from this bond is lower.
you will receive the same amount of coupon payments from the issuer while you are holding the bond.
your return on this bond will be higher later when you hold it to the maturity date.

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