Question

Qualitatively what will happen to the price of your bonds if: you own Treasury Bonds and...

Qualitatively what will happen to the price of your bonds if: you own Treasury Bonds and a deep decline in US GDP occurs? you own Treasury Bonds and the FED tries to stimulate the US economy? you own Hauser Oil Corporate Bonds, and Hauser Oil has a massive oil spill?

Homework Answers

Answer #1

During Decline in US GDP the risk will increase and hence yield will increase thereby reducing the price of the bonds.
When the Fed tries to stimulate the US economy then interest rates will fall and hence yield of bonds will fall thereby increasing the price of bonds.
If Hauser oil has a massive oil spill risk of their bond increases due to clean up amount and penalties. Hence yield will increase and price of the bonds will decrease.

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