Which of the following statement s about bond yield in financial markets is are correct 1 If yield o...........

Economic Affairs Financial Markets

Download Solution PDF

Which of the following statement/s about bond yield in financial markets is/are correct?

1. If yield of bond increases it is has tendency to be counted as junk bond

2. As price of bond decreases, yield of bond increases

3. As price of bond decreases, interest rate of bond increases

Choose the correct answer from the code given below

1 only

2 and 3 only

1 and 2 only

All of the above

छोटे Courses बड़े Results

Master Financial Markets

Prepare through Micro-courses

Try Now

Explanation:

All the statements are correct.
Bond yield is the amount of return an investor realizes on a bond. Several types of bond yields exist, including nominal yield which is the interest paid divided by the face value of the bond, and current yield which equals annual earnings of the bond divided by its current market price.
Bond prices and yields are like a seesaw: when bond yields go up, prices go down, and when bond yields go down, prices go up.
Bond prices decrease when interest rates increase because the fixed interest and principal payments stated in the bond will become less attractive to investors.
Conversely, if interest rates were to fall after your purchase, the value of your bond would rise because investors cannot buy a new issue bond with a coupon as high as yours.