Solution-What is a discount bond, An increase in interest

What is a discount bond

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What is a discount bond? What will happen to the price of a discount bond as it approaches maturity?

1- Given TWO (2) identical bonds with the same coupon rate but different maturity dates, the bond with a longer maturity date is said to be more risky than the bond with a shorter maturity date. Why?

2- A bond is called a discount bond when the selling price is lower than its par value. Theoretically, why do discount bonds exist?

3- An increase in interest rate will result in a fall in bond prices. But the price change experienced by a bond with low coupon rate will be much more than that of a bond with high coupon rate. Why is this so?

Reference no: EM13910303

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What is a discount bond

Reference no: EM13910303

Reference no: EM13910303

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