A drop in interest rates causes proportionally greater gains than increases in rates will cause losses.

Question

Quizplus · Accepted Answer

This statement is true. When interest rates decrease, the value of existing fixed-income investments will increase proportionately more than they would decrease if interest rates were to rise. This is because the lower interest rates make the fixed-income investment more valuable compared to other investments, leading to an increase in demand and price. On the other hand, if interest rates were to rise, the value of existing fixed-income investments would decrease, but not as much as they would have increased if interest rates had decreased.

A Drop in Interest Rates Causes Proportionally Greater Gains Than