Bonds
A debt security issued by either a corporation, the federal government, or a state government. Investors become a creditor of the issuer and receive interest payments from the issuer for lending their capital. Interest payments are made to investors semi-annually.
Par Value of a bond (unless stated otherwise)
$1,000 unless stated otherwise.
As interest rates as a whole go DOWN, existing bond prices will go UP. This is due to the inverse relationship between overall rates and prices on existing bonds. As interest rates go down, the new bonds with lower rates are less desireable, leading to an increase in the price of existing bonds with higher rates which are more desirable.
As interest rates go Up, bond prices will go down. This is due to the inverse relationship between overall rates and prices on existing bonds. As interest rates go up, the new bonds with higher rates are more desirable, leading to a reduction in the price of existing bonds.
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