Homework SourseIf the interest rate rise the price of outstanding bond will
If the interest rate rise, the price of outstanding bond will :
A. Increase as well
B. Flactuate randomly
C. Not change
D. Decrease
If the interest rate rise, the price of outstanding bond will :
A. Increase as well
B. Flactuate randomly
C. Not change
D. Decrease
A. Increase as well
B. Flactuate randomly
C. Not change
D. Decrease
Solution
The interest rate of the bond effects the price of the bond.
When Interest rate is increased, the future cash flows will also be discounted at higher rate and therefore the value of bond today will fall .
