QUESTIONS 97 THROUGH 108 RELATE TO FIXED INCOME INVESTMENTS

101. Consider a $100 par value bond with a 7% coupon paid annually and 5 years to maturity. At a discount rate of 6.5%, the value of the bond today is $102.08. One day later, the discount rate rises to 7.5%. Assuming the discount rate remains at 7.5% over the remaining life of the bond, what is most likely to occur to the price of the bond between today and maturity? A. Increases then decreases B. Decreases then increases C. Decreases then remains unchanged