Which statement is true?
A)Bond prices and the interest rate are inversely related.
B)A lower interest rate raises the opportunity cost of holding money.
C)The supply of money is directly related to the interest rate.
D)The total demand for money is directly related to the interest rate.

Question

Quizplus · Accepted Answer

Bond prices and interest rates have an inverse relationship, meaning that as bond prices go up, interest rates go down, and vice versa. This is because when demand for bonds is high, investors are willing to accept a lower yield, which is represented by a lower interest rate. Conversely, when demand for bonds is low, investors require a higher yield, which is represented by a higher interest rate.

Which Statement Is True