rootX
Oct30-09, 02:22 AM
If I buy a bond for 1000$ that provides 10% interest rate with maturity in 10 years. During the 5th year, interest rate rises to 20%.
1) This would lower my bond price because people who buy new bonds now will get 20% interest rate?
2) Borrowers would not make new bonds because they would have pay more so
a) the supply will go down?
b) demand will go up because more people want bonds at 20%. People will be willing to buy bonds of higher face values?
1) This would lower my bond price because people who buy new bonds now will get 20% interest rate?
2) Borrowers would not make new bonds because they would have pay more so
a) the supply will go down?
b) demand will go up because more people want bonds at 20%. People will be willing to buy bonds of higher face values?