CFA level 1 : Fixed income

mehak.officiallink
Good Student
Posts: 31
Joined: Sat Mar 08, 2014 6:59 am

CFA level 1 : Fixed income

Postby mehak.officiallink » Sat Aug 23, 2014 7:33 pm

Why is it that lower the coupon rate more is the percentage change in the value of the bond ?
Why is that more the maturity period more is the percentage change in the value of the bond ?
(Relationship between bond price and bond characteristic : pg 403 : Fixed income)

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

CFA level 1 : Fixed income

Postby edupristine » Tue Aug 26, 2014 12:35 pm

Lower the coupon means you'r greater portion of investment will be recovered by principal payment, So any % change will impacted by remaining principal.
Next is the maturity period if the bond has a greater maturity means you will get your principal after a long time so it will increase the principal risk


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