Answer the question on the basis of the following information for a bond having no expiration date: bond price = $1,000;bond fixed annual interest payment = $100;bond annual interest rate = 10 percent. Refer to the given information.If the price of this bond falls by $200,the interest rate will:
A) rise by 2.5 percentage points.
B) rise by 5 percentage points.
C) fall by 2.5 percentage points.
D) fall by 5 percentage points.

Question

Quizplus · Accepted Answer

If the bond price falls to $800, the interest rate becomes $100/$800 = 12.5%. The increase from the original 10% rate is 2.5 percentage points.

Answer the Question on the Basis of the Following Information