The total return on a 5 year bond with $10000 par value and an annual coupon rate of 6 percent will be most favourable if interest rates

Question

Quizplus · Accepted Answer

When interest rates decrease, the price of existing bonds with higher coupon rates increases, leading to a more favorable total return for the bondholder. In this case, decreasing from 6% to 4% would increase the bond's value the most among the given options.

The Total Return on a 5 Year Bond with $10000