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.

Question

Quizplus · Accepted Answer

A higher discount rate means that investors can earn higher returns by investing in alternative assets that are less risky than corporate bonds, preferred stock, and common stock. Therefore, the demand for these securities decreases, which leads to reduction in their prices.

A Higher Interest Rate (Discount Rate) Would