You Hold a Long-Term Bond Yielding 10

question 2

True/False

You hold a long-term bond yielding 10%. If interest rates fall before you sell the bond, you will sell at a higher price than if interest rates had been constant.
Since the interest rates on a bond are fixed, a decrease in yields available on similar bonds means that this bond is more desirable, and would therefore increase its price.

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Definitions:

Monte Carlo Simulation

A computational technique used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables.

Standard Distribution

Often refers to a probability distribution that is used to represent the dispersion of a set of data around its mean, typically assumed to be a normal distribution.

Monte Carlo Simulation

A computational algorithm that uses repeated random sampling to obtain numerical results, often used to model the probability of different outcomes in a process that cannot easily be predicted due to the intervention of random variables.

Demand During Lead Time

The total customer demand for a product during the period it takes to reorder and receive a new supply.