Significant change in interest rates

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Reference no: EM138312

Q. In the early 1980s, interest rates on long-term debt were at remarkable levels - above 15percent higher. Within a decade, rates had dropped suddenly. I have some questions about that:

• Illustrate what would be the effect of a decline in interest rates on those instruments have on their price?

• What impact would that decline have on other financial implement? (Mortgages, Money Market Instruments, Stock)

• What does the change in prices after a significant change in interest rates say about the relationship of price and interest rates?

• Most of the bonds that had been issued in the early 1980s were no longer on the market by the mid-1990s. Why do you suppose that is?

Reference no: EM138312

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