Idk Oct 30 class Flashcards
1
Q
What’s the relationship between interest rate and coupon bond price?
A
Inverse.
As interest rate goes up, bond price goes down (downward sloping).
2
Q
What happens to the bond price curve in the long term (in relation with interest rate)?
A
Gets steeper
Because of fluctuations, because price P depends on number of years, n.
3
Q
Why does the bond price curve get stepper in the long run?
A
In the long-term, there are more cashflows being discounted in the long run.
