Bond Rates
1. Coupon Rates If a bond’s coupon rate were above its required rate of return, would its price be above or
below its par value? Explain.
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2. Bond Price Sensitivity Is the price of a longterm bond more or less sensitive to a change in interest
rates than to the price of a short-term security? Why?
3. Required Return on Bonds Why does the required rate of return for a particular bond change
over time?
