how much the bond price will be if the market rate is the same as the coupon rate for a $1,000 face value bond? how much the same bond will be priced if the maturity is only 3 months away when market rate has dropped 2% below the coupon rate?

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08-11-2022
Business

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how much the bond price will be if the market rate is the same as the coupon rate for a $1,000 face value bond? how much the same bond will be priced if the maturity is only 3 months away when market rate has dropped 2% below the coupon rate?

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Qwpanda Qwpanda · Answer 1 · 2022-11-12T15:16:36+01:00

If the Market rate and coupon rate are the same, then the bond price can't change which means the bond price is the same as the face value, so here the Bond price will be $1000 as it's not changed because the market rate and coupon rate are the same.

If the 2% decrease in bond interest rate then the bond price is increased above par value so there is a market premium, so the bond price will be increased by 2% = $1020

The stocks and the bond price are generally related to each other. When the price of the bond begins to fall, the stock market will plummet too. Stock returns and bond returns can both be negative. The price which investors are willing to pay is known as the bond price. The market price of the bond consists of two parts. The face value of the bond represents the first part and the bond interest payment represents the second part.

To learn more about bonds and market rates,

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