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Money and interest rates

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Question 13

A perpetual government bond has a nominal value of £300 and pays a fixed annual coupon of £18. Due to a tightening of monetary policy, market interest rates rise, causing the market price of this bond to fall from £240 to £200. Which of the following correctly describes the change in the current yield of the bond?

A decrease of 1.5 percentage points

An increase of 1.5 percentage points

An increase of 3.0 percentage points

A decrease of 3.0 percentage points

Money and interest rates Questions

  1. A Level
  2. /Economics
  3. /Money and interest rates