Explore BrainMass

Explore BrainMass

    Relationship Between Bonds and Interest Rates.

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

    What is the relationship between bond price and interest rate changes? Under what interest rate conditions would the value of bonds increase? Why?

    © BrainMass Inc. brainmass.com June 3, 2020, 11:06 pm ad1c9bdddf
    https://brainmass.com/business/bond-valuation/relationship-between-bonds-interest-rates-263950

    Solution Preview

    First, the present value of the bond is generally equal to its current price. Second, the lower the current interest rate is the higher the present value of the bond. Thus, if interest rate changes, then the present value of the bond and its price also changes.

    If the change causes ...

    Solution Summary

    The solution examines the relationship between bonds and interest rates.

    $2.19

    ADVERTISEMENT