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You Buy a Bond for $1, 000 from the Federal

Question 156

Multiple Choice

You buy a bond for $1, 000 from the federal government, which guarantees that you will receive $70 a year forever.Thus, 7 percent was the market rate of interest when you bought the bond.Suppose that immediately after you buy the bond, the market rate of interest goes to 10 percent.The market value of your bond


A) could be more or less than $1, 000
B) will be less than $1, 000
C) will be more than $1, 000
D) will remain unchanged
E) will be $1, 000

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