Why Consumers Should Buy A House Or Purchase A Bond

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There are several factors that can shift the demand and supply functions which alters the bonds market quantity, price and interest rates. The demand and supply functions explain interest rates behavior during these business cycles and recessions. For example In the US. “Interest rates have fluctuated gradually during the second half of the 20th century” (Boundless, n.d.). Interest rates determine whether consumers should save or buy, whether a family should buy a house or purchase a bond. Furthermore the interest rates influence business decisions to invest in new equipment or invest their money into financial securities. Major financial instruments like the credit market instruments are loans, where one party lends funds to another party except corporate stock. Stock only conveys ownership in a corporation and it’s not a loan. Companies and governments issue a variety of credit instruments with different maturities, therefore each credit instrument has an interest rate associated with it. All interest rates move together meaning if one interest rate rises so does the other as well. Bonds supply and demand determine the interest rates in the bonds market making the bond the tradable item. Investors buy bonds while businesses and government trade these bonds. Therefore, the interactions of supply and demand functions in the bond market determines the bonds market price and quantity. The demand function reflects the relationship

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