In: Finance
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
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. |