Bond price 1 / Yield
Quantitative Finance
Level
3
As bond yield increases, the price of bonds fall.
Is the following statement True, False, or It depends?
If you own a bond, and a part of the yield curve increases (while the rest remain constant), then your bond price would have dropped
It depends on the time to maturity
Price would have increeased
Price would have dropped
It depends on the coupon rate
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1 solution
If the increase in the yield curve happens only after your bond matures, then it will not affect your bond price.
If the increase in the yield curve happens before your bond matures, then yes the bond price will decrease.
Hence, the answer is "It depends on the time to maturity".