Explore BrainMass

# Relationship between interest rates and bond prices

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

What is an example of the "present value" concept? How does a single cash flow present value example differ from an annuity calculation?

What is the relationship between interest rates and bond prices

#### Solution Preview

Present value is the future value being discounted by an appropriated capitalisation rate. The value of sum of money received today is more than its value received after some time.
In other words present worth of rupee received after some time will be less than the rupee received today. This is because of time value of money. The investor has time preference of money because he has reinvestment opportunities for funds, which are received early.

The present value of a future cash flow is the nominal amount of money to change hands at some future date, discounted to account for the time value of money. A given amount of money is always more valuable sooner than later since this enables one to take ...

#### Solution Summary

This discusses the relationship between interest rates and bond prices

\$2.19