Why do rising interest rates generally depress stock prices?
A)Businesses have to pay higher interest rates to borrow money, thus reducing their profits.
B)Stock investors tend to take their money out of the stock market and invest in interest-paying investments.
C)Future earnings will not be worth as much as today.
D)All of these.

Question

Quizplus · Accepted Answer

Rising interest rates can lead to a variety of negative effects on businesses, including higher borrowing costs and reduced profits. This can in turn lead investors to pull their money out of the stock market to pursue safer, interest-paying investments, contributing to a decline in stock prices. In addition, future earnings may not be worth as much as they would be with lower interest rates, further depressing stock prices.

Why Do Rising Interest Rates Generally Depress Stock Prices