Explore BrainMass

relationship between bond prices and interest rates

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

Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of long-term bonds versus short-term bonds?

© BrainMass Inc. brainmass.com October 16, 2018, 7:44 pm ad1c9bdddf

Solution Preview

The relationship between the bond prices and the interest rate is inverse. Thus if there is decline in the interest rate it leads to increase in the bond prices and vice versa.
As the interest rate goes up, the price of the bond decreases. At a 12% interest rate, the bond is valued exactly ...

Solution Summary

The relationship between bond prices and interest rates is solidified.

Similar Posting

Bond prices and interest rates: the relationship

Discuss the relationship between interest rates and bond prices? When must the yield to maturity of a bond equal the current yield? What makes some bonds sell at a premium while others sell at a discount?

Discuss how to use the tables to determine Present and Future Values, or Present Value and Future Annuities.

View Full Posting Details