Darragh Kelly
Ton up Member
Hi,
Just have a couple of questions from the notes from chapter 11.
Page 18 (last sentence):
For example, an decision to increase the use of index-linked bonds might lead to lower prices and higher yields on index-linked bonds and higher prices and lower yields on conventional bonds
I get how an increase in supply of index-linked bonds will reduce price - market flooded with these bonds, so price will come down (law of supply and demand). But not sure why conentional bonds will increase in price (and decrease in yield)?
Page 30:
The level of net cashflow itself will primarily refect the level of saving throughout the economy, whilst the balance between the different institutional investors will reflect the relative popularity of the savings vehicles that they provide.
The net cashflow is the difference how much costumers deposit the bank account and how much bank invests in the market? I'm guessing smaller net balance means a banks savings account is popular? Not quite sure what the statements means.
Page 31:
For example, if a requirement is introduced for institues to value their liabilities using a discount rate no higher than the running yield obtained on investments, then this would increase the relative appeal of investments, such as bonds, with a high running yield.
I'm not really sure what this means...
Thanks very much,
Darragh
Just have a couple of questions from the notes from chapter 11.
Page 18 (last sentence):
For example, an decision to increase the use of index-linked bonds might lead to lower prices and higher yields on index-linked bonds and higher prices and lower yields on conventional bonds
I get how an increase in supply of index-linked bonds will reduce price - market flooded with these bonds, so price will come down (law of supply and demand). But not sure why conentional bonds will increase in price (and decrease in yield)?
Page 30:
The level of net cashflow itself will primarily refect the level of saving throughout the economy, whilst the balance between the different institutional investors will reflect the relative popularity of the savings vehicles that they provide.
The net cashflow is the difference how much costumers deposit the bank account and how much bank invests in the market? I'm guessing smaller net balance means a banks savings account is popular? Not quite sure what the statements means.
Page 31:
For example, if a requirement is introduced for institues to value their liabilities using a discount rate no higher than the running yield obtained on investments, then this would increase the relative appeal of investments, such as bonds, with a high running yield.
I'm not really sure what this means...
Thanks very much,
Darragh