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Relationships between interest rates and bond prices

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What is the relationship between interest rates and bond prices?
When must the yield to maturity of a bond equal the current yield?
What makes some bonds sell at a premium while others sell at a discount?

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Solution Summary

This solution answers three questions concerning bond valuation, addressing interest rates, bond prices, yielding to maturity and premium vs. discounted bonds.

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1. Bond prices are related inversely to interest rates, i.e., when interest rates go up, bond ...

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