In 400 words explain the following: 1. What is the relationship between interest rate level and...

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Finance

In 400 words explain the following:
1. What is the relationship between interest rate level and bondprice? Why must this relationship be true? How has the current rateenvironment impacted the prices of bonds?
2. What are some factors to consider in evaluating a company'sability to make payments on outstanding debt? Please explain thefactors rather than just providing a list.
Apply appropriate examples that illustrate your points - feelfree to bring your workplace experiences into the discussion. Ithelps us all learn when we can relate our past workplaceexperiences to what we're learning here in the discussions.
You may not use any quoted material even if sources are cited.Please make sure all posts are written entirely in your ownwords.

Answer & Explanation Solved by verified expert

4.4 Ratings (900 Votes)

1 The relationship between price of bond and market interest rate is inverse That is when interest rate rise price of bond decrease and when interest rate falls bond price increase This is because fixed coupon rate So if interest rate fall even the bondholder gets the fixed coupon payment so overall value of bond increase Similarly when interest rate rises even the bond holder gets the coupon rate at same rate so overall bond See Answer

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In 400 words explain the following:1. What is the relationship between interest rate level and bondprice? Why must this relationship be true? How has the current rateenvironment impacted the prices of bonds?2. What are some factors to consider in evaluating a company'sability to make payments on outstanding debt? Please explain thefactors rather than just providing a list.Apply appropriate examples that illustrate your points - feelfree to bring your workplace experiences into the discussion. Ithelps us all learn when we can relate our past workplaceexperiences to what we're learning here in the discussions.You may not use any quoted material even if sources are cited.Please make sure all posts are written entirely in your ownwords.