Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market.What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates
A)fall in reaction to the increased demand for bonds.
B)fall in reaction to the decreased demand for bonds.
C)rise in reaction to the increased demand for bonds.
D)rise in reaction to the decreased demand for bonds.

Question

Quizplus · Accepted Answer

As demand for bonds increases, the price for the bonds goes up. As a result, the yield or interest rate on the bond decreases. Therefore, when bond prices rise, interest rates fall.

Stock Prices Fell Throughout Much of 2007 and 2008 and Many