ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Bond price and bond yield are inversely related. As the price of a bond goes up, the yield decreases. As the price of a bond goes down, the yield increases.

Detailed explanation-2: -Price and yield are inversely related: As the price of a bond goes up, its yield goes down, and vice versa. There are several definitions that are important to understand when talking about yield as it relates to bonds: coupon yield, current yield, yield-to-maturity, yield-to-call and yield-to-worst.

Detailed explanation-3: -Price-The higher a bond or CD’s price, the lower its yield. That’s because an investor buying the bond or CD has to pay more for the same return. Years remaining until maturity-Yield to maturity factors in the compound interest you can earn on a bond or CD if you reinvest your interest payments.

Detailed explanation-4: -When bond yields fall, it results in lower borrowing costs for corporations and the government, leading to increased spending. Mortgage rates may also decline with the demand for housing likely to increase as well. Investopedia does not provide tax, investment, or financial services and advice.

Detailed explanation-5: -When the demand for a particular bond increases, all else equal, its price will rise and its yield will fall. The supply of a bond depends on how much the issuer of a bond needs to borrow from the market, such as a government financing its expenditure.