Question

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3.) Increasing risk in bond markets leads to --------- demand for bonds, -------- bond prices, and a ----- yield-to-maturity.

a.) lower, higher, higher

b.) lower, lower, higher

c.) higher, lower, lower

d.) higher, higher, higher

4.) Sam Goldfarb reported in the wall street journal (27 Aug 2019) that " yields on short-term Treasurys are largely dictated by expectations for short-term interest rates set by the Fed, while yields on longer-term bonds are more influenced by the outlook for growth and inflation." If the outlook for growth and inflation is that there will be no change in growth, but higher inflation, then how will this affect the yield on longer-term bonds?

Answer 1

3)

b.) lower, lower, higher

the above is answer..

because higher risk discourages investors to invest in bond markets which reduces demand for bonds.As demand declines, there will be decline in bond prices and we know price and bond yield are inversely related, so with lower price the yield will increase

we do only one question based on Chegg rule