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This is in contrast to willingness to pay (WTP), which is the maximum amount of money a consumer (a buyer) is willing to sacrifice to purchase a good/service or avoid something undesirable. [1] The price of any transaction will thus be any point between a buyer's willingness to pay and a seller's willingness to accept; the net difference is the ...
However,“price” here refers to the quoted (clean) price. Thus it is more precise to say that bonds sell for “quoted price plus accrued interest”, not because the quoted price is calculated and then accrued interest is added, but because the quoted price is determined by deducting accrued interest from the calculated actual (dirty) price.
According to the constructed preference view, consumer willingness to pay is a context-sensitive construct; that is, a consumer's WTP for a product depends on the concrete decision context. For example, consumers tend to be willing to pay more for a soft drink in a luxury hotel resort in comparison to a beach bar or a local retail store.
On the flip side, when interest rates fall, bond prices rise. Older bonds that offer higher interest payments become more valuable because they provide better returns than newly issued bonds with ...
Pimco said it's reducing exposure to long-term U.S. bonds amid concerns about soaring federal deficits and debt. Instead, it favors shorter-term bonds, some overseas issuers, and corporate debt.
Bondholders are ready to pay for such protection by accepting a lower yield relative to that of a straight bond. Of course, if an issuer has a severe liquidity crisis, it may be incapable of paying for the bonds when the investors wish. The investors also cannot sell back the bond at any time, but at specified dates. However, they would still ...
The price excluding accrued interest is known as the "flat" or "clean price". Most government bonds are denominated in units of $1000 in the United States, or in units of £100 in the United Kingdom. Hence, a deep discount US bond, selling at a price of 75.26, indicates a selling price of $752.60 per bond sold.
Bonds, ETFs, mutual funds or dividend stocks might be a good place to reinvest money once a CD matures if your goal is long-term growth. Many of the best investment platforms offer low-cost ways ...