The value of shares in bond funds tends to rise with an increase in interest rates.

Question

The value of shares in bond funds tends to rise with an increase in interest rates.​

Quizplus · Accepted Answer

The value of shares in bond funds tends to decrease with an increase in interest rates. This is because when interest rates rise, bond prices typically fall, as newer bonds with higher interest rates become more attractive to investors than existing bonds with lower rates. As bond prices in the fund fall, so does the value of shares in the fund.

The Value of Shares in Bond Funds Tends to Rise