Lecture Notes on Time Value of Money

e. If market interest rates remain unchanged, the bond’s price one year from now will be higher than it is today. 12. Which of the following bonds would have the greatest percentage increase in value if all interest rates in the economy fall by 1%? Answer: e. a. 10-year, zero coupon bond. b. 20-year, 10% coupon bond. c. 20-year, 5% coupon bond. ................
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