INTEREST RATES
If interest rates are 8%, what is the price of a 4-year bond with a face value of £100 and an annual coupon of 7%?
If interest rates are 9%, what is the price of a 4-year bond with a face value of £100 and an annual coupon of 7%?
If the bond was a perpetual bond and the interest rates are 8% and the rests are similar to above , what will be its price?Explain the relationship between bond prices and interest rates. Use graph where appropriate.
