Will a Non-Callable Bond's Price Change Over Time or Will

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The Answer is Whenever interest rates or the issuer's credit quality change (or are thought to change), the bond's price will likely change. The true path of the bond's price can fluctuate wildly, but as the bond approaches maturity, the bond price will converge to its par (face) value. If interest rates and credit quality are assumed to remain constant, we can plot out the bond's price a little more accurately. If the level of interest rates is above (below) the coupon rate, the bond is selling at a discount (premium), which means the price is below (above) the par value. If interest rates equal the coupon rate, the bond is said to sell at par. Over time, the bond's price will converge to the par value. So, in the case of the discount (premium) bond, the price will constantly increase (decrease) until maturity.

Will a Non-Callable Bond's Price Change Over Time or Will

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Will a Non-Callable Bond's Price Change Over Time or Will

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Correct Answer:
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