What happens to the price of a three-year annual coupon paying bond with an 8% coupon when interest rates change from 8% to 6.81% ? Answer in dollar terms to the nearest decimals without the $ sign. Use a "-" sign to denote a price decrease. Do

What happens to the price of a three-year annual coupon paying bond with an 8% coupon when interest rates change from 8% to 6.81% ? Answer in dollar terms to the nearest decimals without the $ sign. Use a "-" sign to denote a price decrease. Do

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 6DTM

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Concept explainers

Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.

Question

D4)

What happens to the price of a three-year annual coupon paying bond with an 8%
coupon when interest rates change from 8% to 6.81% ? Answer in dollar terms to the
nearest decimals without the $ sign. Use a "-" sign to denote a price decrease. Do
not use a "+" sign.

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