The statement "Bond prices vary inversely with changes in the market rate of interest" means that if the
A)market rate of interest increases, the contractual interest rate will decrease.
B)contractual interest rate increases, then bond prices will go down.
C)market rate of interest decreases, then bond prices will go up.
D)contractual interest rate increases, the market rate of interest will decrease.

Question

Quizplus · Accepted Answer

When the market rate of interest decreases, existing bonds with higher interest rates become more attractive, leading to an increase in their prices.

The Statement "Bond Prices Vary Inversely with Changes in the Market