Assume you are a potential investor in Ghana and based on your analysis of the Ghanaian financial
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Question:
Assume you are a potential investor in Ghana and based on your analysis of the Ghanaian financial market, you are expecting interest rate to rise in the long term. How will this expectation affect:
i. Investor's behaviour with respect to their choice for short or long-term assets.
ii. The shape of the yield curve in Ghana today
iii. Now suppose the market interest rate on comparable bonds falls to 13 percent. What will be the approximate percentage change in the bond price.? (Hint: use the modified duration for your computation in (ii))
iv. Given the information in (i), did the bond sell at a discount or premium?
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