Why bond prices are inversely related to interest rates?



Why bond prices are inversely related to interest rates?..

Answer / Pawan Pratap Singh

When interest rates rise, newly issued bonds offer higher yields, making existing bonds with lower yields less attractive. This results in a decrease in demand for those bonds, causing their prices to fall (inverse relationship). Conversely, when interest rates drop, the opposite happens: bond prices increase because of increased demand.

Is This Answer Correct ?    0 Yes 0 No

Post New Answer

More Banking Finance Interview Questions

Name some projects in which government has to make public expenditure?

1 Answers   RBI,


What do you mean by interest coverage ratio?

1 Answers  


6. Equipment A has a cost of Rs.75,000 and net cash flow of Rs.20000 per year for six years. A substitute equipment B would cost Rs.50,000 and generate net cash flow of Rs.14,000 per year for six years. The required rate of return of both equipments is 11 per cent. Calculate the IRR and NPV for the equipments. Which equipment should be accepted and why?

1 Answers  


why should be concered with in risk capital budgeting? is the standard deviation an adequate budgeting? is the stansard deviation an adequate measure of risk? Can you think of a better measure ?

1 Answers   Wipro,


What is balloon payment?

1 Answers  


i am doing my mba and selected for clerk for sbi now tell me what should i do? can sbi give me leave for the exam if i selected.

2 Answers  


What are different types 'tax receipts'?

1 Answers  


What is a Limited company?

1 Answers   State Bank Of India SBI,


What is Book Value?

21 Answers   Capital IQ,


What are the essential qualities to become investment bankers?

1 Answers  


What are the steps taken by banks to promote financial inclusion?

1 Answers  


Why You Want To Enter In Banking Industry?

1 Answers  


Categories
  • Business Administration Interview Questions Business Administration (517)
  • Marketing Sales Interview Questions Marketing Sales (1279)
  • Banking Finance Interview Questions Banking Finance (3208)
  • Human Resources Interview Questions Human Resources (747)
  • Personnel Management Interview Questions Personnel Management (68)
  • Hotel Management Interview Questions Hotel Management (29)
  • Industrial Management Interview Questions Industrial Management (113)
  • Infrastructure Management Interview Questions Infrastructure Management (14)
  • IT Management Interview Questions IT Management (97)
  • Supply Chain Management Interview Questions Supply Chain Management (16)
  • Operations Management Interview Questions Operations Management (39)
  • Funding Interview Questions Funding (79)
  • Insurance Interview Questions Insurance (494)
  • Waste Management Interview Questions Waste Management (1)
  • Labor Management Interview Questions Labor Management (48)
  • Non Technical Interview Questions Non Technical (73)
  • Business Management AllOther Interview Questions Business Management AllOther (546)