If You Own a Bond with a Seven Percent Coupon

question 177

Short Answer

If you own a bond with a seven percent coupon rate and new bonds are paying five percent, what will happen to your bond's market price?

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Definitions:

Infinite Duration

A term used to denote a period that does not have an end or limit.

Fixed-Term Tenancy

A type of tenancy under which property is leased for a specified period of time, such as a month, a year, or a period of years; also called a tenancy for years.

Sublet

Refers to the act of a tenant renting out a space they have leased to another party.

Community Property

A form of concurrent property ownership in which each spouse owns an undivided one-half interest in property acquired during the marriage.