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.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.6: Perpetuities

Problem 2ST

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