Question
A bond with a face value of ₹1,000 pays an annual
coupon of 8% and matures in 5 years. If the current market yield for similar bonds is 10%, the bond is most likely trading at:Solution
When the market yield (10%) is higher than the bond's coupon rate (8%), the bond becomes less attractive. To compensate buyers, its price falls below its face value, i.e., it trades at a discount.
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The angle at the centre representing Cherry is:
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