# Lending and interest rates

It states in my textbook that as interest rates are lowered it says lenders are the ones who gain from the decrease in interest rates. But isnt this not true? As lower interest rates imply the amount you net from lending decreases as interest decreases?

Yes. That's tricky for newcomers to figure out. The concepts to keep in mind are:

a) to buy a bond is essentially to lend to the bond issuer

and

So let's say that, in 2010, you bought a 30-year bond at \$10,000 face value that was yielding a 5% rate (known as the coupon rate) and today, in 2020, a 20-year bond is being issued also at \$10,000 par value but only offers a 4% return ($400 annual coupon). Because bonds are tradable, that means your 30-year bond with 20 years remaining and an annual coupon of \$500 should now have buyers willing to pay a bit more than the $10,000 you paid for it. Specifically, they can pay up to around$1.135 and still get the equivalent yield to maturity as the newly issued 20-year bond, a 13.5% profit for you.