Which of the following statements is correct?
A) There is an inverse relationship between bond prices and bond yields.
B) There is a positive relationship between bond prices and bond yields.
C) There is no relationship between bond prices and bond yields.
D) The relationship between bond prices and bond yields is dependent on the market interest rate.

Question

Quizplus · Accepted Answer

There is an inverse relationship between bond prices and bond yields. When bond yields rise, prices fall, and vice versa. This is because the fixed payments from the bond become more or less attractive compared to the new market rates.

Which of the Following Statements Is Correct