Why Would Anyone Accept a Negative Interest Rate? #Shorts | Economics Explained

The video tutorial explains the concept of negative yields, where investors receive less money than they invest in bonds. It highlights that large institutions often buy these bonds for safety, as regular bank accounts are insufficient for their vast sums of money. The tutorial also discusses how government bonds are considered safe investments, backed by the government, and how companies like Apple might choose to invest in foreign bonds to hedge against currency inflation.

What does it mean to buy a bond with negative yields?

• You break even on your investment.

• You receive less money than you invested.

• You receive more money than you invested.

• You receive dividends instead of interest.

Why might large institutions prefer negative yield bonds over regular bank accounts?

• They offer higher returns.

• They are easier to liquidate.

• They are insured for unlimited amounts.

• They provide a safer place for large sums of money.

What is the insurance limit for bank accounts in the US?

• $100,000

• $250,000

• $500,000

• $1,000,000

Why might a company like Apple invest in government bonds of a country like Germany?

• To avoid paying taxes in the US.

• To diversify their investment portfolio.

• To benefit from higher interest rates.

• To protect against US dollar inflation.

How can investing in a foreign government bond be profitable despite negative yields?

• If the foreign currency appreciates faster than the home currency.

• If the bond is sold before maturity.

• If the foreign currency depreciates slower than the home currency.

• If the bond matures faster than expected.