Duration of a coupon paying bond is:
Equal to its number of payments.
Less than a zero coupon bond.
Equal to the zero coupon bond.
Equal to its maturity.
None of the above.
The relationship between the bond prices and the interest rate is inverse. Thus if there is decline in the interest rate it leads to increase in the bond prices and vice verca.
As the interest rate goes up, the price of the bond decreases. At a 12% interest rate, the bond is valued exactly at par -- but if the rate increases to ...
This Solution contains over 200 words to aid you in understanding the Solution to this question.