You bought a GMI bond for $1,000 that has a coupon rate of 7.75 percent.If you were to sell this bond several years before maturity when the interest rate on comparable new issues was 9.5 percent,you would probably get

Question

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When interest rates rise, the value of existing bonds with lower coupon rates decreases. This is because investors can now purchase new bonds with higher coupon rates, making the lower rate on your bond less attractive. Thus, if you were to sell your bond when interest rates are higher, you would likely receive less than the original $1,000 purchase price.

You Bought a GMI Bond for $1,000 That Has a Coupon