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
When the bond prices rise, interest rates fall.
True
FalsE
Expert Solution
Step 1
Bonds:
Bond is a kind of debt instrument typically issued by corporations, government organizations and universities is usually utilized for the purpose of raising fund for companies or governmental agencies. The price of the bond is calculated by adding the present value of the principal amount of bond and present value of the interest payment of the bond. Both the principal amount and interest payments amount are discounted at the present value of the effective interest rate for the bonds.
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