The price of a bond with a fixed coupon rate and the market required return have a relationshipthat is best described as

Question

Quizplus · Accepted Answer

The price of a bond and its required return have an inverse relationship, meaning that as the required return increases, the bond price will decrease, and vice versa. This is because investors will only be willing to pay a certain price for a bond based on how much return they can earn from it compared to other investments in the market. Therefore, when the required return increases, the bond's fixed coupon rate becomes less attractive, causing its price to decrease.

The Price of a Bond with a Fixed Coupon Rate