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

Question

Quizplus · Accepted Answer

When market interest rates increase, the demand for existing bonds decreases and their market value decreases as well. This is because newly issued bonds will have higher interest rates, making the old bonds less attractive to investors. Therefore, the market value of the bond decreases.

When Market Interest Rates Increase After a Bond Is Issued,the