The primary reason for changes in bond rates is:
A)changes in the state of the economy.
B)higher rates of inflation.
C)changes in interest rates.
D)an increase in the likelihood of a war.

Question

Quizplus · Accepted Answer

The primary reason for changes in bond rates is changes in interest rates. When interest rates rise, bond prices typically fall, and when interest rates fall, bond prices typically rise. This is because an investor in a bond wants a higher return if they are going to lock their money up in a long-term investment, and rising interest rates mean they can find better returns elsewhere. Inflation and the state of the economy can also impact bond rates, but they are more secondary factors compared to changes in interest rates. The likelihood of a war may have an impact on the economy as a whole, but its impact on bond rates would likely be less direct or less significant.

The Primary Reason for Changes in Bond Rates Is