Explore BrainMass

Explore BrainMass

    Market Yield Impact on Bond

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A 10-year corporate bond is issued with a face value of $100,000, paying interest of $2,500 semi-annually. If market yields decrease shortly after T-bond is issued, what happens to the bond's:

    A. Price
    B. Coupon rate
    C. Yield to maturity

    © BrainMass Inc. brainmass.com June 3, 2020, 6:47 pm ad1c9bdddf

    Solution Preview

    The price of the bond goes up.
    Since the market yield has decreased that means that the interest rate has gone down. Bond prices move in opposite direction of interest rates. As the interest rate goes down the price of the bond goes up (conversely if the interest rate goes up the price ...

    Solution Summary

    This solution looks at what happens to a bond's price, coupon rate, and yield to maturity (YTM) when the market yield decreases.