Bond prices and yields:

Question

Quizplus · Accepted Answer

Bond prices and yields have an inverse relationship - when bond prices go up, yields go down, and vice versa. This is because when the price of a bond goes up, its yield (which is essentially the return on investment) becomes relatively lower compared to the new, higher price. Conversely, when bond prices go down (for example, due to changes in interest rates or market conditions), yields rise to make the bond relatively more attractive to potential investors. This relationship between bond prices and yields is a fundamental principle in fixed income investing.

Bond Prices and Yields