Lin has a B rated $30,000 bond with a coupon of 2.5% maturing in 2030 that is currently yielding 3.2%. This year, the Fed is expected to lower interest rates by 50 basis points. Explain the effect on the price, yield and cash flow of the bond. (indicate if it will increase or decrease)
Lin has a B rated $30,000 bond with a coupon of 2.5% maturing in 2030 that is currently yielding 3.2%. This year, the Fed is expected to lower interest rates by 50 basis points. Explain the effect on the price, yield and cash flow of the bond. (indicate if it will increase or decrease)
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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Lin has a B rated $30,000 bond with a coupon of 2.5% maturing in 2030 that is currently yielding 3.2%. This year, the Fed is expected to lower interest rates by 50 basis points. Explain the effect on the price, yield and cash flow of the bond. (indicate if it will increase or decrease)
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