Fixed Income Q82

0. Miss Williamson is long term investor. She recently purchased a 10- year, 8% annual coupon payment bond and plans to hold it till maturity. What will be the most likely impact on the returns of this bond, if the market interest rates are higher in future?

Answer
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Option : C
Explanation : In a buy-and-hold strategy if the market interest rates are higher in the future, the returns will increase because the reinvestment income will increase.

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