Relationship between the interest rate and the bond price, Ask an Expert

Economics

Relationship between the interest rate and the bond price

Note that the higher the issue price, the lower the interest rate. Similarly when the price of a government bond increases, interest rate falls and vice versa. Price of a government bond is generally determined by demand and supply that means you can understand movements in these interest rates by analysing the market. For illustration if the government needs to borrow more money, supply increases, bond prices fall and interest rates increase.

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9577310

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