Question

1a.)When there is disruption and political turmoil outside the U.S., what can we expect will happen to corporate bond prices and Treasury bond prices?

1b.) If portfolio managers expect stronger economic growth, what can we expect will happen to corporate bond prices and Treasury bond prices?

Answer 1

(1) (a) If Political - If Political turmoil happens the government will ensure not to keep bonds with them. The goverment will start selling the bonds supply which will ultimately lead the price to decrease. ş Price will decrease , Bonds will be sol (1) (b) . This relation is directly propotional here Here, the price for corporate bonds and Treasury bonds is directly propotional to the demand for the bonds. The e prices increases for corporate & Treasury bond increases and the demand for these bond which increases.