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in a rising interest rate environment,how would bond values change over time. as a bond investor...

in a rising interest rate environment,how would bond values change over time. as a bond investor what measures would you take to manage risk

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Expert Solution

Bond price and interest rate have inverse relationship. The increase in interest rate would decrease the price of bond over time. In this situation bond investor should seek to purchase the bond at lower price and held this bond until maturity to avoid interest rate risk. Existing bondholders could immunize the risk by purchasing similar bond at lower price and selling the bond in future. Bond investor should avoid to sell the bond as it would receive lower price for its bond resulting in loss for the investor.

jeff jeffy answered 2 years ago
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