A decline in market interest rates

Question

Quizplus · Accepted Answer

When market interest rates decline, the fixed interest payments of existing bonds become more attractive, which increases demand for the existing bonds and drives up their prices. This holds true for both newly issued and previously issued bonds. However, for newly issued bonds, the issuer can offer a lower interest rate due to the declining market rates, which increases their attractiveness to investors and can result in higher prices.

A Decline in Market Interest Rates