How is the interest rate that prevails in the bond market determined?
A) by the interaction of stock prices and bond prices
B) by the decision of the president, in consultation with Congress
C) by the intersection of the demand for and supply of bonds
D) by the Board of Governors of the New York Stock Exchange

Question

Quizplus · Accepted Answer

The interest rate that prevails in the bond market is determined by the intersection of the demand for and supply of bonds. As in any other market, the interest rate adjusts to balance the quantity of bonds demanded and supplied. Factors that affect the demand and supply of bonds include the level of economic activity, inflation expectations, fiscal policy, and monetary policy. Stock prices and the decisions of the president or the Board of Governors of the New York Stock Exchange do not directly determine the interest rate in the bond market.

How Is the Interest Rate That Prevails in the Bond