A higher interest rate (discount rate) would
A)reduce the price of corporate bonds.
B)reduce the price of preferred stock.
C)reduce the price of common stock.
D)All of these options

Question

Quizplus · Accepted Answer

A higher interest rate increases the discount rate used in valuing future cash flows, leading to a decrease in the present value of those cash flows, thus reducing the prices of corporate bonds, preferred stock, and common stock.

A Higher Interest Rate (Discount Rate) Would