You buy a 12 percent, 25-year, $1,000 par value floating rate bond in 1999. By the...
You buy a 12 percent, 25-year, $1,000 par value floating rate bond in 1999. By the year 2014, rates on bonds of similar risk are up to 14 percent.
What is your one best guess as to the value of the bond?
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Homework Answers
Value of the bond = $1,000
With a floating rate bond, the rate the bond pays changes with interest rates in the market. Therefore, theprice of the bond stays constant. The one best guess is $1,000.
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