Final answer:
The exact size of the corporate bond cash market in 2008 is not provided, but corporate bonds are instruments for firms to raise capital and offer higher yields to compensate for higher risk compared to government bonds. Their pricing is influenced by interest rate changes, where prices typically decrease if market rates rise and increase if rates fall.
Step-by-step explanation:
The size of the corporate bond cash market in 2008 is not specified in the information provided. However, we can discuss the nature of corporate bonds and what factors influence their value in the market. Corporate bonds are debt securities issued by firms to raise capital. The return on these bonds is associated with the risk involved, meaning firms that are perceived as riskier borrowers will offer a higher interest rate to attract investors.
When considering the impact of interest rate changes on the price of a bond, if interest rates rise, the price of existing bonds generally falls, meaning you might expect to pay less than $10,000 for a bond previously valued at that price. Conversely, if interest rates fall, existing bonds with higher interest rates become more attractive, and their price may increase, leading you to pay more than the initial $10,000.
Corporate bonds, especially those with an AAA rating from Moody's, tend to offer higher yields than government securities such as 10-year Treasury notes. However, although they pay higher interest rates, the yields on corporate bonds are influenced by the same factors that affect Treasury bonds, including changes in overall interest rates.