With respect to bonds, when interest rates increase:
A)the coupon rate also increases.
B)the coupon rate remains unchanged.
C)the price of the bond rises.
D)the price of the bond remains unchanged.

Question

Quizplus · Accepted Answer

The coupon rate of a bond is fixed at the time of issuance and does not change with fluctuations in interest rates. Therefore, when interest rates increase, the coupon rate of existing bonds remains unchanged.

With Respect to Bonds, When Interest Rates Increase