1. A 10-year Corporate bond is issued with a face value of $100,000,
paying interest of $2,500 semi-annually.
If market yields decrease shortly after the T-bond is issued, what
happens to the bond?s:
            
a. price?           
            
b. coupon rate?           
            
c. yield to maturity?

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Request for Question Clarification by scriptor-ga on 28 Jan 2006 11:00 PST

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Scriptor

I'm going to assume you are an investor and not someone doing their homework. 

Price would go up (ie you can demand a premium when selling it since
it is carrying higher than current rates)

Yield to Maturity goes down for someone buying it from you (since they
are paying a premium to buy it from you) and remains the same for you.
Here is a bond yield calculator:
http://www.moneychimp.com/calculator/bond_yield_calculator.htm
Here is a bond yield formula:
http://www.moneychimp.com/articles/finworks/fmbondytm.htm
Coupon rate remains the same.

http://personal.fidelity.com/products/fixedincome/howbondswork.shtml
http://money.cnn.com/pf/101/lessons/7/page2.html
http://www.investinginbonds.com/learnmore.asp?catid=46
http://www.investinginbonds.com/learnmore.asp?catid=46&id=4

Happy Investing.