Which of the following is not true if interest rates rise?
A) Existing bonds may be called.
B) Prices of existing bonds fall.
C) The yield to maturity rises more than the current yield.
D) The market price of a zero coupon bond falls.

Question

​Which of the following is not true if interest rates rise?
A) ​Existing bonds may be called.
B) ​Prices of existing bonds fall.
C) ​The yield to maturity rises more than the current yield.
D) ​The market price of a zero coupon bond falls.

Quizplus · Accepted Answer

When interest rates rise, existing bonds may not necessarily be called; this depends on the terms of the bond and the issuer's decisions. Bond prices fall, yields (including yield to maturity) generally increase, and the market price of zero coupon bonds falls because their fixed payouts become less attractive compared to new bonds issued at the higher current interest rates.

​Which of the Following Is Not True If Interest Rates

Which of the Following Is Not True If Interest Rates