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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 Preview

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

    Solution Summary

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