Question

For fixed-rate bonds it's important to realize that the value of the bond has a(n) relationship to the level of interest rates. If interest rates rise, then the value of the bond ; however, if interest rates fall, then the value of the bond . A bond is one that sells below its par value. This situation occurs whenever the going rate of interest is above the coupon rate. Over time its value will approaching its maturity value at maturity. A bond is one that sells above its par value. This situation occurs whenever the going rate of interest is below the coupon rate. Over time its value will approaching its maturity value at maturity. A par value bond is one that sells at par; the bond's coupon rate is equal to the going rate of interest. Normally, the coupon rate is set at the going market rate the day a bond is issued so it sells at par initially.

Answer 1

For fixed rate bonds it's essential to understand that the estimation of the security has a backwards relationship to the degree of loan costs. On the off chance that the loan fees rise, at that point the estimation of the security diminishes; in any case, on the off chance that the financing cost fall, at that point the estimation of the bond increments. A lesser coupon Bond is one that sells beneath its standard worth. This circumstance happens at whatever point the going pace of intrigue is over the coupon rate. ver time is worth will increment. A higher coupon Bond is one that sells over its standard worth. This circumstance happens at whatever point the going pace of intrigue is underneath the coupon rate. After some time its worth will diminish moving toward its development esteem at development. A standard worth security that sells at standard; the security's coupon rate is equivalent to the going pace of intrigue. Regularly, the coupon is set at the going business sector rate the day security is given so it sells at standard at first.