If the expected return on bonds increases,all else equal,the demand for bonds increases,the price of bonds ________,and the interest rate ________.
A)increases;decreases
B)increases;increases
C)decreases;decreases
D)decreases;increases

Question

Quizplus · Accepted Answer

When the expected return on bonds increases, investors will demand more bonds, causing the price of bonds to increase. However, an increase in bond prices means the interest rate decreases. This is because the yield on the bond (the interest rate) moves in the opposite direction of its price. Therefore, choice A is the best answer.

If the Expected Return on Bonds Increases,all Else Equal,the Demand