If interest rates rise, the prices of existing bonds increase.

Name: If interest rates rise, the prices of existing bonds increase.
Brand: Quizplus
Rating: 4.8 (41 reviews)

Question

If interest rates rise, the prices of existing bonds increase.​

Quizplus · Accepted Answer

When interest rates rise, the prices of existing bonds decrease. This is because investors can earn higher interest rates on new bonds issued at the higher rate, reducing the demand for existing bonds with lower rates. As a result, bond prices must fall to attract buyers.

If Interest Rates Rise, the Prices of Existing Bonds Increase