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What is the relationship between bond price and Present Value in equilibrium?

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Question

What is the relationship between bond price and Present Value in equilibrium?

Options

  • Bond price is always less than its Present Value (PV)

  • Bond price equals its Present Value (PV)

  • Bond price is always greater than its Present Value (PV)

  • Bond price equals the Coupon Rate

MCQ
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Solution

In equilibrium, the bond price equals its Present Value (PV). Demand and supply pressures move the price toward this value.

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