Explain Why There Is an Inverse Relationship Between Bond Prices

question 32

Essay

Explain why there is an inverse relationship between bond prices and the bond interest rate.

---

Definitions:

Variable Costing

A method of costing that includes only variable production costs — costs that change with the level of output — in the calculation of unit costs.

Production Planning

The process of forecasting, planning, and controlling the quantity, timing, and quality of production activities.

Absorption Costing

A method of accounting that incorporates all costs associated with manufacturing (such as direct materials, direct labor, and all overhead expenses, whether fixed or variable) into the product's cost.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure used to evaluate a company's profitability without the effects of financing and accounting decisions.