If investors are fleeing zero coupon bonds, they must be expecting an increase or a decrease...
If investors are fleeing zero coupon bonds, they must be expecting an increase or a decrease in market interest rates? Explain
Homework Answers
If the investors are fleeing zero coupon bonds, they must be expecting an increase in the interest rate.
There will be a decrease in the price of the bond if the interest rate increases. The interest payments are not there for zero coupon bonds. Instead , when the bond is matured, the investors collect principal and interest together. These bonds are purchased at a lower value than their face value.
If the interest rate increases the bond will have to be sold before maturity. There will be loss of value in that scenario.
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If investors are fleeing zero coupon bonds, they must be
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