Question
The price of government securities is influenced by which of the following?
Select the correct answer using the code given below:
- Interest rate in the economy
- Liquidity in the market
- Developments in forex, money and capital markets
Select the correct answer using the code given below:
Answer: Option D
Answer: (d)
When the interest rate moves up in the economy, government securities (bonds) prices go down. If the liquidity in the economy is surplus, the interest rate comes down in the economy resulting in higher bond prices.
Developments in money, capital and forex markets also impact the interest rates and liquidity in the domestic economy resulting in changes in government securities prices.
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Answer: (d)
When the interest rate moves up in the economy, government securities (bonds) prices go down. If the liquidity in the economy is surplus, the interest rate comes down in the economy resulting in higher bond prices.
Developments in money, capital and forex markets also impact the interest rates and liquidity in the domestic economy resulting in changes in government securities prices.
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