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    Doodles1414's Avatar
    Doodles1414 Posts: 1, Reputation: 1
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    #1

    Mar 2, 2008, 06:08 PM
    Price of Bonds
    Castle issued bonds at face value at a yield to maturity of 7 percent. Now, with 8 years left until the maturity of the bonds, the company has run into hard times and the yield to maturity on the bonds has increased to 15 percent. What has happened to the price of the bond?
    manik chand dey's Avatar
    manik chand dey Posts: 63, Reputation: 2
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    #2

    Oct 3, 2008, 03:49 AM

    Price of the bond will fall.This is because a bond's price will be lower when it pays a coupon that is lower than prevailing interest rates. As market interest rates increase, bond prices decrease.
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