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    price of a bond when interest rates in the economy increase

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    What happens to the price of a bond that pays a fixed percent of the face value every year when interest rates in the economy increase.

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    The fixed payment made to the bondholders is called coupon rate. The investors of bond expect to receive a yield on these bonds, which is same as the interest rate on the bond with similar risk. This yield is received by the bondholders in two forms - through coupon payments and through appreciation of the bond price. Since ...

    Solution Summary

    Address a conceptual question about bond valuation and analysis with example. (234 words)