If interest rates are expected to rise, you would expect:
A) bond prices to fall more than stock prices.
B) bond prices to rise more than stock prices.
C) stock prices to fall more than bond prices.
D) stock prices to rise and bond prices to fall.

Question

Quizplus · Accepted Answer

When interest rates rise, bond prices typically fall because the fixed interest payments of existing bonds become less attractive compared to new bonds issued at higher rates. Stocks may also be affected, but bond prices are generally more sensitive to interest rate changes.

If Interest Rates Are Expected to Rise, You Would Expect