If interest rates in general rise,
A) the prices of existing bonds rise
B) the prices of existing bonds fall
C) the prices of matured bonds rise
D) the prices of matured bonds fall

Question

If interest rates in general rise,
A) ​the prices of existing bonds rise
B) ​the prices of existing bonds fall
C) ​the prices of matured bonds rise
D) ​the prices of matured bonds fall

Quizplus · Accepted Answer

When interest rates rise, the yields on newly issued bonds increase, making previously issued bonds with lower yields less attractive to investors. As a result, the demand for these existing bonds decreases, causing their prices to fall in order to attract buyers.

If Interest Rates in General Rise