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
On January 1st 2014, Roshan bought a 20-year treasury bond with a face value of $1000 and a coupon rate of 2.7% for $998.20. A year later she sold the bond at a price of $1003.70. Which of the following is correct?
In 2015, the long-term interest rate went up but is below 2.7%.
In 2015, the long-term interest rate went down but is above 2.7%.
In 2015, the long-term interest rate went up and is above 2.7%.
In 2015, the long-term interest rate went down and is below 2.7%.
Expert Solution
Step 1: Define bond
Bond is a debt instrument which offers a series of fixed interest payments for a defined number of years and the principal repayment at the end of maturity.
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