Monetary Policy

• Government bonds help raise funds through interest rates.
• Government bonds are sold to an investor with a fixed interest.
• The maturity of a bond refers to how long the money is kept with the bank.
• Yield = (Coupon / bond price) x 100
• A coupon is the rate of annual interest rate.
• The yield is the return that an investor expects to receive.
• Government bond coupon rates are fixed so if the bond price increases, the yield decreases.
• A high yield is good for the lender because they get higher interest.
• A higher yield is bad for the Government because they pay more interest rates.