An Increase in the Market Rate of Return on an Outstanding

question 26

Multiple Choice

An increase in the market rate of return on an outstanding bond will

• A) increase the coupon rate.
• B) decrease the bond price.
• C) decrease the coupon rate.
• D) increase the bond price.

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Definitions:

Compounded Semi-annually

The process of calculating interest on both the initial principal and the accumulated interest from previous periods twice a year.

Compounded Monthly

Compounded monthly refers to the process where interest is calculated and added to the principal sum every month, effectively increasing the total amount at a quicker pace.

Amortization Period

The total time period over which a loan or mortgage is scheduled to be paid off, often through regular payments.

Compounded Quarterly

Interest on an investment or loan is calculated and added to the principal once every three months.