Question: Explain why if interest rates increase after a bond issue, the bond's price will decline and the yield to maturity will increase. Explain how the

Explain why if interest rates increase after a bond issue, the bond's price will decline and the yield to will increase. Explain how the time to impacts the extent to which interest rate changes impact the bond's price. Additionally, assume that you have a short investment horizon.
You are considering two investments: a 1-year Treasury security and a 20-year Treasury security. Explain why the longer-term Treasury security would be considered riskier than the shorter-term Treasury security.

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Bond Price and interest rates have inverse relations Hence if the interest rates increase bond prices decrease Current Bond Price is the present value of all the future cash flows at the current interest rates When interest rates are equal to the coupon rate the present value of cash flows is equal to the par value of the bond and yield to maturity is equal to coupon rate But when the interest rate increase the present value of cash flows decreases and hence the bond price ... View full answer

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