Bond Rates

1. Coupon Rates If a bond’s coupon rate were above its required rate of return, would its price be above or

below its par value? Explain.

2. Bond Price Sensitivity Is the price of a longterm bond more or less sensitive to a change in interest

rates than to the price of a short-term security? Why?

3. Required Return on Bonds Why does the required rate of return for a particular bond change

over time?

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