Explain why bond prices fall when inflation increases

Determination of Interest Rates 

Prior to beginning work on this assignment, read Hubbard and O’Brien’s (2017) Chapters 3 and 4. Choice Financial is a financial services firm based in San Diego, California. In early 2018, Tom Jones, a financial analyst for the firm, predicted that the inflation rate would go up from 1.5% in 2018 to 6% in 2020. He advised investors not to buy bonds because their prices would fall as inflation increased.

  • Explain why bond prices fall when inflation increases.
  • Analyze the relationship between the price of bonds and interest rates.
  • Appraise how interest rates are determined using the following models and whether the different models produce different results in determination of interest rates:
    • Demand and Supply
    • Bond Market
    • Money Market
  • Evaluate how each of the following affects interest rates and the price of bonds:
    • Yield to Maturity
    • Bond Yields
    • Risk

The Determination of Interest Rates paper

  • Must be three to four double-spaced pages in length (not including title and references pages) and formatted according to APA style as outlined in the Ashford Writing Center (Links to an external site.)Links to an external site..
  • Must include a separate title page with the following:
    • Title of paper
    • Student’s name
    • Course name and number
    • Instructor’s name
    • Date submitted
  • Must use at least three scholarly, peer-reviewed, and/or other credible sources in addition to the course text.
    • The Scholarly, Peer Reviewed, and Other Credible Sources (Links to an external site.)Links to an external site. table offers additional guidance on appropriate source types. If you have questions about whether a specific source is appropriate for this assignment, please contact your instructor. Your instructor has the final say about the appropriateness of a specific source for a particular assignment.
  • Must document all sources in APA style as outlined in the Ashford Writing Center.
  • Must include a separate references page that is formatted according to APA style as outlined in the Ashford Writing Center.