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If the Price of a Bond Increases,the Interest Rate (Or

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If the price of a bond increases,the interest rate (or rate of return on the bond)decreases.


Definitions:

Loan Contract

A legally binding agreement between a borrower and a lender that outlines the terms and conditions of a loan.

Interest Payments

Regular payments made to lenders or bondholders as compensation for the use of borrowed funds, usually calculated as a percentage of the principal.

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, which represents the rate before taking into account the compounding period.

Simple Interest

Interest calculated solely on the principal amount of a loan or deposit, over a particular time period.

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