Why is the relationship between price and yield negative? a. Because investors reward higher cash-flows with a lower price. b. Because governments regulation prohibits a positive relationship. c. Because an increase in the yield discounts cash flows at a higher rate and so their net present value decreases. d. Because cash flows are variable over a bond’s life.

Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
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Chapter13: Monetary Policy
Section: Chapter Questions
Problem 12E
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Why is the relationship between price and yield negative?
a. Because investors reward higher cash-flows with a lower price.
b. Because governments regulation prohibits a positive relationship.
c. Because an increase in the yield discounts cash flows at a higher rate and so their net
present value
decreases.
d. Because cash flows are variable over a bond’s life. 

 

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