When the market interest rates decline after a bond is issued,the:
A) face value of the bond decreases.
B) market value of the bond increases.
C) market value of the bond decreases.
D) bond price is at a discount.

Question

Quizplus · Accepted Answer

When market interest rates decline after a bond is issued, the bond becomes more attractive to investors because its fixed interest rate becomes higher in comparison to prevailing market rates. As a result, demand for the bond increases, leading to the bond's market value increasing. Therefore, the correct answer is B - the market value of the bond increases.

When the Market Interest Rates Decline After a Bond Is