What happens to the price of a three-year bond with an 8 percent coupon when interest rates change from 8 percent to 6 percent?
A)A price increase of $51.54
B)A price decrease of $51.54
C)A price increase of $53.47
D)No change in price Using the BAII Plus Calculator:

Question

Quizplus · Accepted Answer

When interest rates decrease from 8% to 6%, the bond's price increases because the bond's fixed coupon payments are more attractive compared to the new lower interest rates. Using a financial calculator, the price increase is calculated to be approximately $53.47.

What Happens to the Price of a Three-Year Bond with an 8