When bond prices go up, interest rates go ___________.
When bond prices go up, interest rates go ___________.
Homework Answers
Answer
go down
the bond price and interest rate are inversely related because the increase in bond price decreases the value of interest paid in market proportionately.
Explain the effect of interest rates on bond pricing and how maturity length and higher and...
Explain the effect of interest rates on bond pricing and how maturity length and higher and lower coupon rates can affect bond prices when interests go up and down in the economy.
Question 1 1). When the central bank raises the interest rates, then generally a. bond prices...
Question 1 1). When the central bank raises the interest rates, then generally a. bond prices increase and stock prices decrease b. bond prices decrease and stock prices increase c. bond prices and stock prices tend to decrease d. bond prices and stock prices tend to increase P.S. is the correct answer "c" option? pls explain. 2). Which of the following must be true regarding the bond described by the cash flow stream (-100, 5, 105)? (select all that apply)...
Changes in interest rates affect bond prices. Which one of the following compensates bond investors for...
Changes in interest rates affect bond prices. Which one of the following compensates bond investors for this risk? Taxability risk premium Default risk premium Interest rate risk premium Real rate of return Bond premium
Bonds are a form of ________, with bond prices and interest rates that move in _________...
Bonds are a form of ________, with bond prices and interest rates that move in _________ . a.equity; the same direction b.equity; opposite directions c.debt; the same direction d.debt; opposite directions e.equity/debt split; sometimes the same direction and sometimes opposite directions If the yield to maturity on a bond is greater than its coupon rate, then a.the corresponding bond price will be greater than its par (face) value. b.the corresponding bond price will be equal to its par (face) value....
According to the theory of liquidity preference, interest rates should go up when there is a decrease in money supply.
True of False.c) According to the theory of liquidity preference, interest rates should go up when there is a decrease in money supply. d) Credit Cards are considered money because they are a medium of exchange. e) Gold is an example of fiat money.
1) Please explain why bond prices are subject to changes in interest rates. 2) Describe the...
1) Please explain why bond prices are subject to changes in interest rates. 2) Describe the characteristics of a bond and provide an example of a firm or government entity that has recently issued (sold) these securities.
8-1 What is the relationship between…. a) bond prices and yields? b) bond prices and interest...
8-1 What is the relationship between…. a) bond prices and yields? b) bond prices and interest rates? c) why are bond prices important to many financial institutions? 8-2 Is the price of a long term bond or the price of a short term security more sensitive to a change in interest rates? Why? 8-3 Why does the required rate of return for a particular bond change over time? 8-4 Assume that inflation is expected to decline in the near future....
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are...
The Fed controls interest rates to either tighten or loosen the economy. When the Feds are needing to tighten the economy, they will raise the interest rates. When interest rates are changed, it sends a ripple effect through the entire financial market. When interest rates rise, cost of capital and borrowing increase. Consumers will borrow and spend less. This will lead to a slower economy and help to hedge inflation. However, the change in interest rates can affect the market...
For the bond problem, assume interest payments are on an annual basis. Go to Table 10-1,...
For the bond problem, assume interest payments are on an annual basis. Go to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 11 percent to 8 percent: a. What is the bond price at 11 percent? b. What is the bond price at 8 percent? c. What would be your percentage return on investment if you bought when rates were 11 percent and...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
For the bond problem, assume interest payments are on an annual basis. Go to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 11 percent to 8 percent: a. What is the bond price at 11 percent? b. What is the bond price at 8 percent? c. What would be your percentage return on investment if you bought when rates were 11 percent and...
A bond has a Macaulay duration of 9.50 and is priced to yield 7.5%. If interest rates go up so that the yield goes to 8.0%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.0%, the percentage change in the price of the bond is %....
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