Get premium membership and access questions with answers, video lessons as well as revision papers.

How does the interest rate affect the prices, demand and yields of bonds

      

How does the interest rate affect the prices, demand and yields of bonds

  

Answers


Dana
When the interest rate rises, the existing bond yield seems less attractive hence the demand and the price of bonds falls resulting in the yields increasing until the bonds seem attractive to buyers once again.
When the interest rate falls, the existing bond yields seem more attractive, thus the demand and the price of bonds rises resulting in the yields falling until the bonds are no longer more attractive to buyers

Dana05 answered the question on July 18, 2019 at 19:30


Next: Highlight the risks faced by bond holders
Previous: Describe the expectation hypothesis

View More Economics Questions and Answers | Return to Questions Index


Learn High School English on YouTube

Related Questions