How do we determine the present value of a bond when market rate differs from its contract rate?
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1. How do we determine the present value of a bond when market rate differs from its contract rate?
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- 1. What is the relationship between interest rate level and bond price? Why must this relationship be true? How has the current rate environment impacted the prices of bonds?What are the implications of interest rate parity theorem.What effect do interest rates have on bond prices? What are the essential assumptions behind bond valuation?