Question

While bond prices fluctuate ,
(A) yeilds are constant
(B) coupon are constant
(C) the spread between yeilds is constant
(D) short term bond prices fluctuate even more

Answer 1

Answer:

I think d is ur right ans

Answer 2

The correct option is (B) coupon are constant.

• The coupon is the preset interest rate that the bond issuer pays to the bondholder. Over the entire life of the bond, this coupon rate doesn't vary regardless of changes in bond prices. Bond prices can fluctuate due to a number of factors, including market interest rates, inflation projections, credit ratings, and others.
• Because new bonds with greater coupon rates are more enticing than existing bonds with fixed coupon payments when market interest rates rise, the prices of old bonds decline. On the other hand, as interest rates drop, the value of existing bonds increases due to their set coupon payments.
• The interest payments to the bondholder remain constant even though bond prices may change. This is because the coupon rate is fixed. For this reason, bonds are frequently seen as a rather secure and dependable source of income for investors.
• As a result, it is true that while bond prices move, coupon rates remain the same.

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