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Bond Valuation

This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.

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November 26, 2016 at 5:58 pm #351708
Muslim Farooque
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Sir why is the yield and bond price relationship convex to the origin and not linear?
November 27, 2016 at 5:46 am #351760
John Moffat
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Because the equation for the bond price (discounting the interest each year) is not a linear equation.
The exact shape is irrelevant for the exam – it is just being able to state the limitation that it is not going to be a linear relationship.
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