BOND PRICES & INTEREST
Bond - borrower promises to pay interest & repay principal at maturity
Coupon - contractual rate of interest - borrower must pay this every year until bond matures
--- does not change if general interest rates change
Bond Prices - once a bond is sold, the price of the bond will change as interest rates change
-bond prices change so that the bond sold at that price will provide a return equal to current market yields
eg.: bond originally sold for $100 with 7% coupon， market yields for same type of bond are now 9%。 this bond is less valuable because it pays a lower rate -> therefore its price falls
Yield -rate of return earned if buy bond at current price
Bond prices move inversely to changes in market interest
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