# What is the impact of increasing the discount rate on the price of a bond?

## Question:

What is the impact of increasing the discount rate on the price of a bond?

## Bond Price:

Bond price presents the present value of all cash flows that will be received. It is computed by adding the present value of coupon payments and present value of the principal balance.

## Answer and Explanation: 1

Become a Study.com member to unlock this answer! Create your account

View this answerIncreasing the discount rate would decrease the price of a bond.

To illustrate, we use the sample problem below to justify the statement above.

The...

See full answer below.

#### Learn more about this topic:

from

Chapter 1 / Lesson 5Bonds are loans with fixed interest rates and time periods, and are valued by factoring in the future value of the bond and comparing it to the general market. Discover how to price bonds and see how factors like coupon rate, duration, and credit quality are used when calculating the worth of a bond.