Question

if the current yield of a bond goes down from 6.1% to 4.3%, by what percent does the market price increase?

Answer 1

If the current yield of a bond goes down then the percent that the market price increases is by 29.50%

By using the formula,

Original price - New price/original price × 100

Here, it is given that

$\frac{6.1 - 4.3}{6.1} \times 100$

$\frac{1.8}{6.1} \times 100$

= 29.50%

A bond is a representation of the promise to repay the principal and, often, interest of a lender. Businesses, national and municipal governments, and governments all issue bonds. The corporation provides the capital in exchange for an interest coupon, which is the annual interest rate paid on a bond expressed as a percentage of face value. The market price is the price at which a good or service is currently being bought or sold. The dynamics of supply and demand have an impact on a good or service's market pricing. On the other side, a long-term balance between supply and demand determines the usual price.

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