Ostroff, Fair and Company
*Ostroff, Fair and Company>>>Investing

A 10-year Treasury bond is issued with a face value of $1,000 paying interest of $60 a year.?


If market yileds increase shortly after the T-bond is issued, what happens tothe bonds:
1. A coupon rate?
2. Price?
3. yield to maturity?

1. the coupon rate remains unchanged at 6%
2. the price of the bond will drop as yields increase to reflect the current yield. ie no one is going to pay more than market price for a bond
3. yield to maturity. This might have different answers based on the context of its usage. The yield to maturity will increase based on the current market price; but the yield to maturity will remain the same based on what the original purchase price was for the purchaser regardless of the current market price.
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