you buy a bond with a fixed coupon rate of 5%. a year later, similar bonds that are issued have a coupon…

you buy a bond with a fixed coupon rate of 5%. a year later, similar bonds that are issued have a coupon rate of 3%. which of the following is true?\nthe price of your bond will increase.\nthe demand for your bond will decrease.\nthe price of your bond will stay the same.\nthe interest rate for your bond will fall to 3%

you buy a bond with a fixed coupon rate of 5%. a year later, similar bonds that are issued have a coupon rate of 3%. which of the following is true?\nthe price of your bond will increase.\nthe demand for your bond will decrease.\nthe price of your bond will stay the same.\nthe interest rate for your bond will fall to 3%

Answer

Brief Explanations:

When new similar - bonds have a lower coupon rate (3% compared to your 5% bond), your bond becomes more attractive. Higher demand for your bond will drive up its price. The fixed - coupon rate of your bond remains 5% and is not affected by the new bond issuances' coupon rates.

Answer:

The price of your bond will increase.