The price of old (or existing)bonds and interest rates have an inverse relationship.

Question

Quizplus · Accepted Answer

When interest rates go up, the value of existing bonds go down and vice versa. This is because investors would rather invest in new bonds that offer higher yields in a rising interest rate environment, which causes the demand for existing bonds to decrease and drives down their prices. On the other hand, when interest rates fall, existing bonds become more attractive to investors as they offer higher yields compared to new bonds, leading to an increase in demand and higher bond prices.

The Price of Old (Or Existing)bonds and Interest Rates Have