If a $1,000 bond has a coupon rate of 11% and the market interest rate falls to 7%, what would a person expect to pay for that bond?

Question

Quizplus · Accepted Answer

The correct answer is B because the bond's price will increase as the market interest rate falls. The bond's price is calculated as the present value of the future cash flows, which include the coupon payments and the face value. As the market interest rate falls, the present value of these cash flows increases, resulting in a higher bond price.

If a $1,000 Bond Has a Coupon Rate of 11