Pertaining to treasury bonds
2007-08-24 17:15:36 · 2 answers · asked by julita 1 in Business & Finance ➔ Investing
The people who answered before me have no clue what they are talking about.
Your question is incomplete. Do you mean to ask what happens to bond prices if yield to maturity stays constant AND time changes? Because if time doesn't change, then the bond price stays the same.
If time is changing, then:
Bonds where the yield to maturity is greater than the coupon rate will increase in value.
Bonds where the yield to maturity is less than the coupon rate will decrease in value.
Bonds where the yield is equal to the coupon rate will be priced at 100% of the face value and will not change through time.
2007-08-25 14:36:58 · answer #1 · answered by Ranto 7 · 3⤊ 0⤋
If the yield to maturity is constant, the bond price will vary depending on the length of time until maturity.
Generally, A five year bond paying 5.0 percent will be priced higher than a longer term bond paying the same rate.
2007-08-24 17:24:16 · answer #2 · answered by Jeff H 5 · 0⤊ 0⤋
Prices adjust based on current interest rates. The yield to maturity will remain contstant on the original cost of the bond but if interest rates go up, the value of the bond will go down to compensate for having lower than market interest. Ditto on going the other way.
2007-08-24 18:13:13 · answer #3 · answered by Anonymous · 0⤊ 0⤋