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FIN - The current rate of inflation is 3% and the long term Treasury bonds

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Question;The current rate of inflation is 3% and the long term Treasury bonds are yielding 7%. You estimate that the rate of inflation will increase to 6%.what do you expect to happen to long term bonds yields? Compute the effect of this estimated change in inflation on the price of a 15 year, 10% coupon bond with a current yield to maturity of 8%?

 

Paper#48589 | Written in 18-Jul-2015

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