1. When overall interest rates rise (to 10%), the bond you already own (with 5% coupon rate) becomes valuable to potential buyers, so its price will 2. When overall interest rates fall (to 2%), the bond you already own (with 5% coupon rate) becomes valuable to potential buyers, so its price will 3. Generally, the longer the duration of the bond, the the chance the bond price may change due to changes in yield

Question

1. When overall interest rates rise (to 10%), the bond you already own (with 5% coupon rate) becomes  valuable to potential buyers, so its price will 2. When overall interest rates fall (to 2%), the bond you already own (with 5% coupon rate) becomes  valuable to potential buyers, so its price will  3. Generally, the longer the duration of the bond, the  the chance the bond price may change due to changes in yield

GPT-4o mini · Answer

1. When overall interest rates rise (to 10%), the bond you already own (with a 5% coupon rate) becomes **less** valuable to potential buyers, so its price will **decrease**. 2. When overall interest rates fall (to 2%), the bond you already own (with a 5% coupon rate) becomes **more** valuable to potential buyers, so its price will **increase**. 3. Generally, the longer the duration of the bond, the **greater** the chance the bond price may change due to changes in yield.