QUESTION 12 Assuming the day after the bond is sold, the yield to maturity incea
ID: 2713504 • Letter: Q
Question
QUESTION 12
Assuming the day after the bond is sold, the yield to maturity inceases from 7% to 9%. What will happen to the price of the bond? Why?
It will rise; the bond price is a function of (Kd) where Kd = Market Interest Rate.
It will fall; the bond price is a function of (1/Kd).
It will not change; the bond price is not a function of (Kd).
a.It will rise; the bond price is a function of (Kd) where Kd = Market Interest Rate.
b.It will fall; the bond price is a function of (1/Kd).
c.It will not change; the bond price is not a function of (Kd).
Explanation / Answer
It will fall; the bond price is a function of (1/Kd).
b.It will fall; the bond price is a function of (1/Kd).
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