Interest rates and prices · Question 5 of 12
What tends to happen to the prices of outstanding bonds when the general level of interest rates rises?
1 answer is correct. Easy
Show answer
Answer
- D They fall
Explanation
After a rise in interest rates, new bonds offer higher coupons. Older bonds with lower coupons become less attractive and lose value until their yield matches the market. When interest rates fall, the opposite happens.