/sci/ - Science & Math

[Anonymous No.1681618]

I don't understand how this works. why would people buy more bonds when the interest rate is low?

[Anonymous No.1681628]

Generally the higher the interest rate the higher the risk

Its a balance between the amount of return you want and the amount of risk you can accept

Like Greek government debt, they were having to sell bond with 20%+ interest rate because there was a very high chance they would default and the investor would lose their money, however 20% is a great return, so, i choose red 13

[Anonymous No.1681629]

:|

you best be trollan nigger

[Anonymous No.1681638]

Because you've exchanged cause for effect.

[Anonymous No.1681643]

>>1681618
> why would people buy more bonds when the interest rate is low
That ain't what your graph says. Your graph also says that interest rates are a function of bonds sold, though. So fuck it.

[Anonymous No.1681646]

>>1681628
oh i see. the professor didn't mention the risk factor but it makes sense now (he was just quoting keynes)

[Anonymous No.1681654]

Well the graph is number of bond SOLD. When the interested is low, you'll want to sold those bonds and get into better placement like obligations. More people buying obligations will up the price of those obligation and they end off paying less... so you'll turn toward public actions, which help the compagny to expend and get more money so they can increase inflation and the interest rate.

[Anonymous No.1681655]

Because bonds have fixed set of return, along with a given risk. If the risk free interest rate is 3% and you have a bond that pays 5% with risk x, you have a 2% risk bonus that that bond is paying you over the risk-free interest rate. If the risk free interest rate drops to 2%, you now have a 3% bonus for the same bond with the same risk. More people will be willing to pay more money for the same bond.

[Anonymous No.1681804]

'em capitalists