A bond's price is determined by the issue's coupon rate, length to maturity, and the prevailing yield in the market.

Question

Quizplus · Accepted Answer

A bond's price is affected by various factors, including the coupon rate, time to maturity, and yield in the market. These factors influence the demand and supply of bonds, which ultimately affect their price. For instance, bonds offering higher coupon rates or with longer maturity periods may be in greater demand, leading to higher prices. Similarly, if the prevailing yield in the market decreases, the price of bonds may increase. Conversely, if the yield goes up, bond prices may drop. Therefore, the given statement is true.

A Bond's Price Is Determined by the Issue's Coupon Rate