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Q: What is the logic behind decrease in bonds when interest rates increase?
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What effect does an increase in the money supply have on inflation?

An increase in the money supply shifts the money supply curve to the right. If you look on your graph, you will see that an increase in money supply will cause the interest rate to decrease. Here's why: Fed increases money supply-->excess supply of money at the current interest rate -->people buy bonds to get rid of their excess money-->increase in the prices of bonds --> decrease in the interest rate.


How are bond prices affected when the Federal Reserve lowers the interest rate?

When the Federal Reserve lowers interest rates, the value of outstanding bonds will increase. The increase in the value of bonds is due to the market price of the bonds adjusting to reflect the lower interest rates available on new bonds. Investors with bond holdings enjoy an increase in the value of their holdings when the Fed cuts rates. However, new investors in bonds will receive a lower rate of interest and if the Fed later raises rates, bond investors will experience a decrease in the market value of their bonds.


What does the effect of rate of interest on bonds?

it will increase the price of bonds


Can FED decrease interest rate without purchasing bonds?

The feds don't decrease the interest rate, it just happens when securities are purchased


What can increase or decrease in atoms during ionic bonds?

The number of ions.


What causes a shift in the supply curve?

the factors that cause the demand curve for bonds to shift are: increase/decrease in inflation rate increase/decrease of common stock increase/decrease of stock prices useful table :


Issuance of long-term bonds that the ratio is less than 1.0 in current ratio decrease increase or have not effect?

increase


Why junk bonds pay a higher interest rate than government bonds of similar maturity?

Interest rates increase as perceived risk increases. Government bonds have virtually no risk. Junk bonds are so called because they carry a high risk of default.


If the federal reserve sells 40 000 in treasury bonds to a bank with 5 interest what is the immediate effect on the money supply?

If the federal reserve sells $40,000 in treasury bonds to a bank with 5% interest the immediate effect on the money supply is an decrease of $40,000.


XYZ Corp sells its bonds at a premium and applies the effective interest method in amortizing the premium.Do you think the annual interest expense will increase or decrease over the life of the bonds?

It really depends on how much is the premium paid. Effectively if the premium paid is higher than the par value of the bonds issued, the annual interest expense would be relatively lower. Another perspective is that since that both the bonds and its premium uses effective interest method, considering all factors remain the same, the annual interest expense will remain unchanged. Premium of the bond should be captialized within the holders of the bonds and amortized over the years in which the manner best represents. Issuer of the bonds generally do not captialize the premium of the bond separately. You should also note that the bonds issued are not compound financial instruments or contain any embedded derivates.


Advantages and disadvantagesPublic offering of bonds?

An advantage of bond financing is: Answer Bonds do not affect owners' control. Interest on bonds is tax deductible. Bonds can increase return on equity. It allows firms to trade on the equity. All of thes


What factors may cause a change in the market and fair value of fixed rate notes and bonds?

One of the key factors that can change the market and fair value of fixed rate notes and bonds is an increase or decrease in market interest rates. Even though a bond has a fixed rate, it's value is dependent on current yields in the market and the value of the bond will move inversely to interest rate changes.