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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
. How Interest Rates Affect Bond Prices
Explain the impact of a decline in interest rates on:
a. An investor's required rate of return.
b. The present value of existing bonds.
c. The prices of existing bonds.
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3. Relevance of Bond Price Movements
Why is the relationship between interest rates and bond prices important to financial institutions?
5. Exposure to Bond Price Movements
How would a financial institution with a large bond portfolio be affected by falling interest rates? Would it be affected more than a financial institution with a greater concentration of bonds (and fewer short-term securities)? Explain.
7. Coupon Rates
If a bond's coupon rate were above its required rate of return, would its price be above or below its par value? Explain.
9. Required Return on Bonds
Why does the required rate of return for a particular bond change over time?
10. Inflation Effects
Assume that inflation is expected to decline in the near future. How could this
affect future bond prices? Would you recommend that financial institutions increase or decrease their concentration in long-term bonds based on this
expectation? Explain.
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