How are bond prices and bond yields determined? This short video explains it!
#aqaeconomics #ibeconomics #edexceleconomics
VIDEO CHAPTERS
00:00 Introduction
00:24 Market interest rates and bond prices
01:43 Bond prices & yields - numerical example
Overview
In this video we work through some numerical examples of the inverse relationship between the market price of fixed-interest government bonds and the yields on those bonds. Government bonds are fixed interest securities. This means that a bond pays a fixed annual interest – this is known as the coupon The coupon (paid in £s, $s, Euros etc.) is fixed but the yield on a bond will vary
The yield is effectively the interest rate on a bond. The yield will vary inversely with the market price of a bond
1.When bond prices are rising, the yield will fall
2.When bond prices are falling, the yield will rise
