What is likely to happen to interest rates if the rate of inflation suddenly increases? Suppose there are two bonds each with coupon payments of $50. The first bond pays $1,000 in five years, and the other one pays $1,000 in ten years. If interest rates increased, would the value of the bonds increase or decrease?
This assignment is in a different direction than your Module 1 Case in that it is mostly computational in nature. Before starting this assignment, work through some of the examples in the background readings to make sure you understand all of the steps involved in future value and present value, including use of present value […]