Yield to Maturity, Interest Rate, Longer Maturity or Higher Coupon Rate
Not what you're looking for?
In determining the yield to maturity on a bond at a given interest rate, you get a value below the current market price, in the next calculation should you use a higher or lower interest rate or a longer maturity or higher coupon rate?
Purchase this Solution
Solution Summary
This solution discusses the effect of interest rates, time to maturity and coupon rate on the price of the bond in 250 words.
Solution Preview
You used a 'given' interest rate and you found out that the bond price that you calculated is below the actual market price. You can use a lower interest rate or a higher coupon rate. Explanation is below:
1) Interest Rates:
Keep in mind that bond prices and interest rates are inversely related. Thus, greater the interest rates, lower the bond prices and ...
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.