Question and answer
Identify and explain what factors may cause a change in the market/fair value of fixed rate notes and bonds?
Investors expect a fair rate of return from bonds, based on prevailing interest rates, term length of the bonds, and their credit rating. [ Since prevailing interest rates change continually, there is interest rate risk in holding bolds if the investor wants to sell the bonds before their maturity. For instance, if a bond, with a $1,000 par value, is issued with a nominal interest rate of 5%
when bonds with similar risk and terms are also at 5%, then the bond can be sold for $1,000. But if interest rates rise to 6%, then the price of the bond is going to drop so that the bond’s $50 interest payment per year will have a yield to maturity (YTM) of 6%. So there are capital gains and losses associated with bonds if they are sold before maturity, so even with securities that are considered risk-free in terms of default, such as U.S. Treasuries, there is still interest rate risk. Another way to look at bond prices and yields is to note that the price of a bond is equal to the sum of the present values of the coupon payments and the principal. When interest rates change, then the present value of those payments changes, also, causing the price of the bond to change with it. Note that since the interest rate factor is in the denominator, it is inversely related to the bond price. The relationship between bond prices and prevailing interest rates is neither simple nor linear. How much bond prices rise or fall depends on the terms of the bonds, the current bond yield, and whether the bonds have embedded options, such as being callable or putable. Burton G. Malkiel has described most of the important general relationships between interest rates and bond prices. for more visit ]
Expert answered|danimai|Points 451|
Question
Asked 12/18/2011 8:27:34 AM
0 Answers/Comments
Get an answer
New answers
Rating

There are no new answers.

Comments

There are no comments.

Add an answer or comment
Log in or sign up first.
Questions asked by the same visitor
I need help if I make a loan for 2564.79 and my Interest is 21.99% for 48 months how much will I be paing back and if i pay off early how much will i have to pay
Weegy: Sir/Madam, this is the amount that you have to pay, 150177.12 (More)
Question
Expert Answered
Asked 12/17/2011 7:05:48 AM
0 Answers/Comments
please discuss what some hidden things are there people should look for when taking out a loan or mortgages? What are some of the things in fine print that people should be aware of?
Weegy: pull together home equity loan brochures for his review and suggest a follow-up meeting to review and discuss his home equity loan needs. (More)
Question
Expert Answered
Asked 12/17/2011 7:50:14 PM
0 Answers/Comments
please discuss what some hidden things are there people should look for when taking out a loan or mortgages? What are some of the things in fine print that people should be aware of?
Weegy: pull together home equity loan brochures for his review and suggest a follow-up meeting to review and discuss his home equity loan needs. (More)
Question
Expert Answered
Asked 12/17/2011 7:53:56 PM
0 Answers/Comments
Why should check cashing shops be outlawed?
Weegy: Pawn shops are highly regulated... I think that check advance places should be regulated and cap their interest at the same they're allowed to charge the military. [ Cash Call is just as bad, charging OVER 99% APR! Imagine what APY that turns into! ] (More)
Question
Expert Answered
Asked 12/17/2011 8:12:40 PM
0 Answers/Comments
Hyphens should be used to make words possessive. True False
Weegy: False. Hyphens can be used to make words possessive but not at all times. [smile] (More)
Question
Expert Answered
Updated 12/18/2011 9:29:16 AM
3 Answers/Comments
A hyphen is never used to make a word possessive. Appostrophes are used to make a word possessive.
Added 12/18/2011 9:12:50 AM
This answer has been added to the Weegy Knowledgebase
@deb, wasn't I able to answer the question whether it was true or false. [sad]
Added 12/18/2011 9:26:53 AM
Your explanation was wrong. Hyphens are not "sometimes" used to make a word possessive.
Added 12/18/2011 9:29:16 AM
18,452,516 questions answered
Popular Conversations
Give the values of a, b, and c from the general form of the equation ...
Weegy: hen the following quadratic equation is written in general form, what is the value of "c"? The formula of ...
11/26/2014 8:05:05 AM| 3 Answers
An object is dropped off a building that is 144 feet tall. After how ...
Weegy: 16t^2 = 144 Simplify, divide both sides by 16 t^2 = 9 t = 3 seconds User: The square of a number exceeds that ...
11/26/2014 8:02:05 AM| 2 Answers
. Simplify this expression: 4p + 9 + (–7p) + 2 = ? A. –3p + ...
Weegy: C. s=40 User: Solve this equation: 80 = 3y + 2y + 4 + 1. A. y = 75 B. y = 15 C. y = 1/5 D. y = –15 ...
11/26/2014 8:28:06 AM| 2 Answers
double marginality
Weegy: According to Nicholas Alex, double marginality is the social burden that African American police officers carry ...
11/26/2014 2:10:01 PM| 2 Answers
If the protagonist tells the story himself, it is told in the ...
Weegy: The story is told in first person if it is told from the protagonist's point of view :)
11/26/2014 2:15:57 PM| 2 Answers
In which specimen were cells first identified?
11/26/2014 11:45:51 PM| 2 Answers
Weegy Stuff
S
L
1
L
P
C
1
P
C
1
L
P
C
1
Points 2734 [Total 14444]| Ratings 10| Comments 2634| Invitations 0|Offline
S
L
Points 1466 [Total 3752]| Ratings 0| Comments 1466| Invitations 0|Offline
S
L
Points 777 [Total 1298]| Ratings 6| Comments 717| Invitations 0|Offline
S
Points 767 [Total 799]| Ratings 1| Comments 757| Invitations 0|Online
S
1
L
1
L
P
P
L
P
Points 767 [Total 14141]| Ratings 0| Comments 767| Invitations 0|Offline
S
1
L
L
Points 273 [Total 6667]| Ratings 0| Comments 273| Invitations 0|Offline
S
L
Points 161 [Total 1457]| Ratings 3| Comments 131| Invitations 0|Offline
S
Points 86 [Total 86]| Ratings 1| Comments 76| Invitations 0|Offline
S
Points 50 [Total 50]| Ratings 0| Comments 0| Invitations 5|Offline
S
Points 46 [Total 46]| Ratings 3| Comments 6| Invitations 1|Offline
Home | Contact | Blog | About | Terms | Privacy | Social | ©2014 Purple Inc.