A fall in the price of a bond causes the yield of the bond to
A)rise.
B)fall.
C)remain unchanged.
D)rise if it's a short-term bond and fall if it's a long-term bond.

Question

Quizplus · Accepted Answer

As the price of a bond falls, the yield increases. This is due to the inverse relationship between bond prices and yields. When bond prices go down, the yield goes up to compensate for the lower price and maintain the bond's overall return.

A Fall in the Price of a Bond Causes the Yield