Suppose you are holding a $100 bond that will pay $4 each year for the next two years from today and mature two years from today.
(a) If the current market rate of interest is 6% what is the current market price of your bond?
(b) Suppose someone whose expertise you trust tells you that tomorrow market interest rates will rise above today's 6%. How would you manage your portfolio of bonds and money in response to that information? Explain the reasons, and provide a supporting example, for any adjustments to your holdings that you would make.

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The Answer of Suppose you are holding a $100 bond that will pay $4 each year for the next two years from today and mature two years from today.
(a) If the current market rate of interest is 6% what is the current market price of your bond?
(b) Suppose someone whose expertise you trust tells you that tomorrow market interest rates will rise above today's 6%. How would you manage your portfolio of bonds and money in response to that information? Explain the reasons, and provide a supporting example, for any adjustments to your holdings that you would make.

Suppose You Are Holding a $100 Bond That Will Pay