Suppose a bond’s price is expected to decrease by 3% if its market discount rate increases by 50 bps. If the bond’s market discount rate decreases by 50 bps, the bond price is most likely to change by: 3% Less than 3% More than 3% What is the best terminology to describe this pattern (use terminology covered in this unit)? Please explain your answer.
Suppose a bond’s price is expected to decrease by 3% if its market discount rate increases by 50 bps. If the bond’s market discount rate decreases by 50 bps, the bond price is most likely to change by: 3% Less than 3% More than 3% What is the best terminology to describe this pattern (use terminology covered in this unit)? Please explain your answer.
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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- Suppose a bond’s price is expected to decrease by 3% if its market discount rate increases by 50 bps. If the bond’s market discount rate decreases by 50 bps, the
bond price is most likely to change by:
- 3%
- Less than 3%
- More than 3%
What is the best terminology to describe this pattern (use terminology covered in this unit)? Please explain your answer.
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