As interest rates fall, the prices of existing bonds will:
A) rise
B) stay the same
C) fall
D) either a or b, depending on the state of the economy

Question

Quizplus · Accepted Answer

As interest rates fall, it becomes easier for borrowers to obtain funds. This increased demand for money causes the price of existing bonds to rise in order to attract investors. Therefore, the best choice is A) rise.

As Interest Rates Fall, the Prices of Existing Bonds Will