You are concerned about your bond portfolio because market interest rates are expected to fall. Which of these items is also expected to fall?

Question

Quizplus · Accepted Answer

When market interest rates fall, the bond's current yield is expected to decrease because the bond's price increases. The current yield is calculated as the annual interest payment divided by the current market price of the bond. As the price of the bond goes up (which happens when interest rates fall), the current yield goes down since the interest payment remains the same.

You Are Concerned About Your Bond Portfolio Because Market Interest