Question

A 20-year bond with a face value of $1,000 currently sells for $1,050.   One year later, if interest rates have not changed:   (you can always do the math)

		The bond’s price will still be exactly $1,050.
		The bond’s price will still be slightly more.
		The bond’s price will still be slightly less.
		The bond’s price will still be significantly more, (say $50 more).
		The bond’s price will still be significantly less, (say $50 less).

Answer 1

When bond price is higher than the bond par value, bond ytm will be lower than the coupon rate. Bond price will decrease gradually to par value.

Hence, correct option is “The bond’s price will still be slightly less.”

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