When interest rates rise:
A) Asset prices normally fall
B) Fixed income securities normally fall
C) Asset prices normally increase
D) A and B above
E) None of the above

Question

Quizplus · Accepted Answer

When interest rates rise, asset prices, especially those of fixed income securities like bonds, normally fall. This is because the existing bonds with lower interest rates become less attractive compared to new bonds issued at the higher current rates, leading to a decrease in their prices.

When Interest Rates Rise