what happens to the current price of a bond if the bond has a larger par...

Question

Question

what happens to the current price of a bond if the bond has a larger par value

no change

cannot be determined without knowing the market interest rate

increase

decrease

business finance

Answer 1

Answer #1

We know that,

Current price of the bond = Present value of all the coupons and par value discounted at ytm.

Hence, we can say that larger par value will leads to higher present value which in turn increases current price .

The third option (incorrect) is correct.

Kindly do inform me in case you have any queries.

Answer 2

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