Chapter 16 Managing Bond Portfolios

Solutions to Chapter 5. Valuing Bonds Note: Unless otherwise stated, assume all bonds have $1,000 face (par) value. 1. a. The coupon payments are fixed at $60 per year. Coupon rate = coupon payment/par value = 60/1000 = 6%, which remains unchanged. b. When the market yield increases, the bond price will fall. The cash flows are discounted at a higher rate. c. At a lower price, the bond’s ... ................
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