As the price of a bond ________ and the expected return ________,bonds become more attractive to investors and the quantity demanded rises.
A) falls; rises
B) falls; falls
C) rises; rises
D) rises; falls

Question

Quizplus · Accepted Answer

When the price of a bond falls, its expected return or yield rises. This happens because the bond's fixed interest payments represent a higher percentage of the bond's current price. As a result, investors find the bond more attractive, as they can earn a higher return for the same investment. Therefore, the quantity demanded of the bond would increase.

As the Price of a Bond ________ and the Expected