Why do the interest rates go down as the price of bonds increases? (Or vice versa?)?
609896
Bond prices go down as interest rates go up and vice versa.  Bonds need to pay the going rate in the market or they will not sell.  If interest rates go up, the rate that bonds must pay also goes up.  When these rates go up, any existing bonds that are being held drop in price because no one will pay the same price for a bond with a lower interest rate.  \n\nEx: I buy a bond today for $1000 with a coupon rate(interest rate) of 5%.  One year from now, a $1000 bond is available with a coupon rate of 6%.  An investor would no longer pay $1000 for the first bond because they could buy the second bond for the same price and receive more interest.  So the price of the 5% bond would drop.
87794
Interest rates increase, prices of bonds decrease.
339698
If you are refering to t-bills and bonds, then the rate at which the government borrows money is below the yeild curve of other borrowers. The rate at which the governmnet borrows money is at the Risk Free rate (rate on the on the 20 year note (it could be the 30 year bond)) because the government has never defulted on it's payments, and it would be very difficult for them to do so (since they can simply print money). When figuring out a rate of return required for non US government borrowers you need to include a risk premuim, which will raise the rate at which they can borrower money at.
90610
It's pretty simple. Lowering interest rates encourages spending, which rejuvenates the economy. Alan Greenspan has done a fabulous job here in the USA and I wish he hadn't retired.
626405
Let´s use an example. \n\nSay interest rates are 4%. You buy a 30 year U S Government bond paying interest at 4%. You pay $1000 for the bond. Then interest rates go to 5%. But the bond you  bought pays only 4%. Is anyone going to give you $1000 for that bond. The answer is no. Because they can buy a bond that pays 5%. The value of your 4% bond has to reflect the 5% interest rate. The bond is worth about $810 and will pay interest at 4.9% The remaining 0.1 % will be made up by the increase in the value of the bond as it approaches maturity in 30 years.
42674
The reason is something like this. It was in the interest of profit to lower the interest rates in the US. By shifting there money to the new currencies and forcing the interest rates down more people get loans that are not fixed interest. There will come a time when all these rich people switch there money back to US dollar and raise the interest rate and steal all your money.
938581
There is somewhat of a relationship.  If interest rates rise dramatically as they did in the early 80s, people will tend to invest their money in interest bearing instruments rather than gold and the price of gold will fall.  When interest rates are very low as they currently are, gold becomes a much more attractive investment relative to interest bearing investments and the price of gold tends to increase.
1005792
I did.  You can usually get a much better (and fixed rather than variable) interest rate that way.  I am not sure what the cons are, I only know the pros.
606751
When interest rates go up, the economy tends to slow down and consumption with it the sales would likely go down.  The opposite happens with interest rates going down.\n\nWhen a currency gains value with respect to other currencies, it's cheaper to buy goods abroad, so the sales for the local good would go down.  If the currency loses value, the opposite happens.\n\nThere might be exceptions with mandatory goods like bread or Giffen goods.
1022341
No, everything is quieting down as interest rates get higher.  They're still good rates, but people think if they can't get it in the 5 - 6% bracket, it's not good.  :(\n\nArizona is still one of the hotter markets though, compared to other areas!
621301
Don’t sue me if I’m a little off but here what I believe.\n\nReal interest rates don’t effect borrowers and lenders they are created by them. Good old supply and demand  for capital.  \n\nSo when the Fed raises or lowers interest rates what are they actually doing is changing the supply of money by changing the discount rate.\n\nThe discount rate is basically the amount of money banks are allowed to loan out relative to real assets or something like that.    \n\nThey certainly make it sound like the fed is changing some legal rate that is a minim interest rate banks mush charge but I think they just a statement of the target they look for when they play with the discount rate.  \n\nSo, there’s also this thing where the government issues bonds and the bonds pay a dividend. How the rate of that dividend determined I’m not sure, but I’m told it’s not actually something the Fed does. It may be the bond market. Bonds trade for prices that aren’t necessarily fixed to some original principal but the dividend is and as the price of the bond changes the ratio between the price of the bond and the dividend or yield….Screw it I’ don’t know what I’m talking about.  \n\nThis is at best in incomplete answer and as far as accuracy goes, don’t take it to the bank.
54607
The general trend of interest rates is moving upward (some analysts said this). Since the price of bond and interest rate has an inverse relationship, hence if r increases then price of bond decreases. Given the assumption that r is increasing, the current price of your bond holdings will be most likely to go down and hence you will incur a loss. This is what we call interest rate risk when one is holding a position in bond. For more research topic on bond risks, go to http://www.investopedia.com. Gud luck
317342
Most important is probably the S&P/Moody's ranking.  The higher/safer the ranking, the lower the interest rate that it has to pay.  Over time, if the ranking changes, then the value of the bond changes.  Changes can come from the company doing well/poorly over time.\n\nGeneral interest rates also determine the value.
61506
When interest rates are going up, avoid long-term bonds.  You might want to look at I Bonds as the rate will vary every 6 months.
334868
Stocks mostly yield less than the risk free rate, yet they are a popular investment because their prices can appreciate.  A riskless bond usually has limited or no price appreciation.  the bond will mature on a known date with a known value.  But a stock can rise and rise in value.  You would invest in a stock if you think it is likely to rise over the long term.  \n\nIn your question you actually ask "why would you hold on to it?" implying you already own something with a low yield.  I must admit if I had a bond that had a yield to maturity less than that of a Treasury of the same maturity, I would sell the bond I have and buy the Treasury!
648604
I-bonds are an unusual beast. There are actually two rates that apply to the bonds. The interest rate and the inflation rate. The rate the government reports is the interest rate. The inflation rate is added to the value of the bond as is the interest rate. \n\nOf course the inflation rate is the rate calculated by the Bureaus of Labor Statistics. Who is to ascertain how accurate it really is or whether or not it is fudged? Of course our government would not meaningfully mis-state the facts now would they?
707425
basically there are 4 factors that determine the value of a bond.\n1.  Its credit rating.  If the credit rating changes downward the price of the bond will drop acordingly as Ford and GM bond holders discovered last year.  Bonds that were selling about about face value suddendly dropped to 75% of face. \n\n2.  Length of maturity.  As a bond approches maturity, its value also approches face value.\n\n3.  Length of time to call.  A bond with an unusually high coupon rate that is selling at a premium will drop towards par value or the call value as it approaches the call date.\n\n4.  Last but most importantly the coupon value as it relates to current interest rates. A bond with a 6% coupon given that current interest rates are at about 5% will sell at a little less than $1200 depending on time to call or maturity, a 20% premium.  Conversely, a bond with a 4% coupon given that current nterest rates are at about 5% will sell at a little more than $800 depending on time to call or maturity, a 20% discount.