The market value of bonds moves in the opposite direction of interest rates.

Question

Quizplus · Accepted Answer

As interest rates rise, the market value of bonds decreases and vice versa. This is because when interest rates increase, new bonds are issued with higher yields, making existing bonds with lower yields less attractive to investors. As a result, the market value of existing bonds decreases in order to make them more competitive with newly issued bonds.

The Market Value of Bonds Moves in the Opposite Direction