If, while you are holding a coupon bond, the interest rates on other similar bonds fall, you can be sure that
A)the coupon payments on your bond will fall.
B)the market price of your bond will rise.
C)the market price of your bond will fall.
D)the par value of your bond will rise.

Question

Quizplus · Accepted Answer

When the interest rates on other similar bonds fall, the market demand for your coupon bond increases as it offers a higher interest rate compared to the new bonds being issued. This leads to an increase in the market price of your bond, as investors are willing to pay a premium to hold it. Therefore, option B - the market price of your bond will rise - is the correct choice.

If, While You Are Holding a Coupon Bond, the Interest