Asked by
Amrit Maharaj
on Dec 02, 2024Verified
Because bond prices are sensitive to changes in interest rates:
A) bonds hardly ever sell in the secondary market at their face value.
B) bond prices are constantly changing.
C) interest rates in excess of the coupon rate cause the bond to sell at a discount, while interest rates below the coupon rate cause the bond to sell at a premium.
D) All of the above
Coupon Rate
The annual interest rate paid by the issuer of a bond to the bondholder, typically expressed as a percentage of the bond's face value.
Secondary Market
A marketplace where previously issued securities and financial instruments such as stocks, bonds, options, and futures are bought and sold.
Interest Rates
The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage.
- Understand how bond prices are influenced by changes in interest rates.
- Grasp the relationship between bond prices, coupon rates, and the market's reaction to fluctuating interest rates.
Verified Answer
AM
Learning Objectives
- Understand how bond prices are influenced by changes in interest rates.
- Grasp the relationship between bond prices, coupon rates, and the market's reaction to fluctuating interest rates.