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Yields zig, prices zag

Q: Why do bond prices go up when bond yields go down?

A: Bond prices react to changes in interest rates.

If you buy a $1,000, 30-year bond with a 5 percent interest rate, it'll pay you $50 per year until maturity, when you get your $1,000 back.

But if interest rates rise, that 5 percent won't be able to compete with newer bonds' higher rates.

The value of your bond will have to drop to make it more attractive to buyers.

Someone selling that bond, then, might have to accept $950 for it instead of its original $1,000.

The buyer will receive the same $50 annual payments and will receive the same $1,000 at maturity.

When interest rates drop, bond prices will rise as people will pay a premium for higher-yielding bonds.

Learn more at www.investinginbonds.com.

The Motley Fool take

Google goes solar

Google (Nasdaq: GOOG) is looking to get a little better return on its cash — by creating a $280 million fund with which SolarCity can expand its residential leasing program.

SolarCity is a full-service solar-energy company providing design, financing, installation and monitoring for solar systems.

Google's money will be used to finance residential projects instead of homeowners paying for entire installations themselves.

SolarCity has set up 15 such funds with various partners, totaling $1.28 billion.

Google, a company that's laden with cash, has been looking for ways to expand its "Do no evil" mantra with renewable energy.

The company, based in Mountain View, Calif., is invested in building a $5 billion wind-power transmission corridor off the Atlantic coast and wind farms in North Dakota, and it has also made investments in the thermal-solar company BrightSource Energy.

Solar manufacturers should cheer anything that helps make solar power more accessible in the U.S. market.

Established higher-efficiency companies such as SunPower, Trina Solar, and Yingli Green Energy in particular should benefit.

Google is slowly turning itself into a major funding source for renewable-energy companies.

In time, that may become a major source of income for the company.