Which of the following best describes the relationship between bond prices and the interest rate?

Question

Quizplus · Accepted Answer

When interest rates increase, investors can earn a higher return on their investments in newly issued bonds, causing the demand for existing bonds to decrease. This decrease in demand leads to a decrease in bond prices. Conversely, when interest rates decrease, the demand for existing bonds increases, leading to higher bond prices. Therefore, the relationship between bond prices and interest rates is inverse, meaning they move in opposite directions.

Which of the Following Best Describes the Relationship Between Bond