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3 factors that affect bond prices
1. Interest rates
In general, when interest rates rise, bond prices fall. When interest rates fall, bond prices rise.
Example – You own a bond paying 3% interest. When interest rates are low – say 1% – your interest rate is higher than the going rate. This makes your bond attractive to other investors. But if interest rates rise to 5%, your bond is less attractive.
2. Inflation...