The price of government securities is influenced by which of the following?
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:
Options:
A . (ii) only
B . (i) & (ii) only
C . (i) only
D . All of the above
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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