An increase in the liquidity of corporate bonds will ________ the price of corporate bonds and ________ the interest rate on those corporate bonds, everything else held constant.
A) increase; increase
B) reduce; reduce
C) increase; reduce
D) reduce; increase

Question

Quizplus · Accepted Answer

An increase in the liquidity of corporate bonds makes them more attractive to investors, leading to higher demand and higher prices for these bonds. As bond prices increase, the interest rates, which move inversely to bond prices, decrease.

An Increase in the Liquidity of Corporate Bonds Will ________