Economics · Financial Markets
Which of these statements regarding bond pricing is true?
- 1Under competitive asset market conditions, the price of a bond must always be equal to its present value in equilibrium.✓
- 2Under competitive asset market conditions, the price of a bond must be less than its present value to benefit the seller.
- 3Under competitive asset market conditions, the price of a bond must exceed its present value to benefit the buyer.
- 4Under competitive asset market conditions, the present value must exceed the price of a bond to benefit the seller.
Correct answer
Under competitive asset market conditions, the price of a bond must always be equal to its present value in equilibrium.
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