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# Relationship between bond prices and bond yields

With interest rates at historic lows, you decide to invest in high yield corporate bonds. Fly-By-Night Inc., has a new 30 year bond issue that seems attractive. Each bond costs \$100 and has a fixed coupon of \$10, a yield of 10%. With \$1000 in your pocket, you decide to buy 10 of these bonds.

You buy them at original issue and the very next day the yield goes to 20%. What does that mean to your income and to your investment? What does that tell you about the relationship between bond prices and bond yields?

#### Solution Preview

Your tutorial shows you four different scenarios in Excel (click in cells to see computations) to show you how price changes the yield. A paragraph explains why this works the way it does. Suitable for a novice.

With interest rates at historic lows, you decide to invest in high yield corporate bonds. Fly-By-Night Inc., has a ...

#### Solution Summary

Your tutorial shows you four different scenarios in Excel (click in cells to see computations) to show you how price changes the yield. A paragraph explains why this works the way it does. Suitable for a novice.

\$2.19