John purchased a corporate bond with a face value of $1,000 and a stated interest rate of 4 percent;if interest rates go up he may be forced to sell the bond at a discount.

Question

Quizplus · Accepted Answer

When interest rates go up, the value of existing bonds with lower interest rates decreases. If John is forced to sell the bond, he may have to do so at a price lower than its face value, resulting in a discount.

John Purchased a Corporate Bond with a Face Value of $1,000