Question

bonds represent liability of a firm and provide return in the form of income and capital gain?

T or F

The movement S&p500 index stock is the most important factor in determining price changes of bonds in the market?

T 0r F

Answer 1

bonds represent liability of a firm and provide return in the form of income and capital gain?

TRUE

Firms raise capital by issuing bonds to the public.

The bond holder receives interest/coupon payments from the firm until maturity and at the time of maturity the bondholder receives

the principal.

In addition, the price of the bond varies according to interest rates. In other words, when interest rates

fall bond prices increase and when interest rates rise bond prices decrease.

The movement S&p500 index stock is the most important factor in determining price changes of bonds in the market?

FALSE.

What determines the price changes of bonds in the market are a change in interest rates.

In other words, when interest rates fall bond prices increase and when interest rates rise bond prices decrease.