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Bonds have a predetermined rate of interest called the stated or contract rate, which is established by the board of directors.
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when interest rates in the general market fall. This makes the interest rate on the bond relatively more attractive.
bonds
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
premium
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
True
Since the current market interest rate is higher, it is more attractive to a new investor then the bond with a lower interest rate. Thus, the price of the lower interest rate bond has to decline to be competitive with new bonds in the market.
When the coupon rate (the contractual periodical "interest" payments) are lower than the yield (the market required return) the bond will be in discount. This discount makes up for the low value of the coupons.
Bonds have a predetermined rate of interest called the stated or contract rate, which is established by the board of directors.
Through open market sales or bonds.
The prices of corporate bonds fluctuate as they are traded on the bond market. Like government bonds, a corporate bond pays a fixed amount of interest each .
by the interest rate they pay thier face value and their term
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When the Federal Reserve lowers interest rates, the value of outstanding bonds will increase. The increase in the value of bonds is due to the market price of the bonds adjusting to reflect the lower interest rates available on new bonds. Investors with bond holdings enjoy an increase in the value of their holdings when the Fed cuts rates. However, new investors in bonds will receive a lower rate of interest and if the Fed later raises rates, bond investors will experience a decrease in the market value of their bonds.