The price of a bond and the market rate of interest are inversely related.

Question

Quizplus · Accepted Answer

When the market rate of interest rises, the price of existing bonds falls because new bonds are likely to be issued at the higher rate, making the existing bonds less attractive unless their prices adjust downward. Conversely, if the market rate of interest falls, existing bonds with higher interest rates become more valuable, causing their prices to increase.

The Price of a Bond and the Market Rate of Interest