Why/Why not use bonds?

Advantages 

• Less Risky and Volatile, with fixed deposits and interest rates, sort of like an income

• Income storage: Money is stored with the company, who is liable to pay you back the full amount after the bond's time runs up

• If the price of bonds increases, you can sell them for a profit

Disadvantages 

• Little potential for bigger profits and returns, with interest rates fixed at purchase

• Companies can default on bonds if they bankrupt, though you have a high claim to their liquidated assets

What determines the price of Bonds?

1. Bondholders can sell bonds in the open market. 

   • • This flexibility leads to fluctuations in bond prices based on supply and demand.

2. Interest Rates: Bond prices are sensitive to changes in prevailing interest rates. As interest rates shift, bond prices move to find equilibrium, either rising when rates drop or falling when rates rise.

   • • When interest rates in the economy rise, the attractiveness of existing bonds with lower interest rates diminishes. Investors might prefer newer bonds offering higher interest rates, causing the prices of older bonds to decrease.

     • Conversely, when interest rates decline, previously issued bonds with higher coupon rates become more appealing. Their fixed-interest payments become comparatively attractive, driving up their prices