If interest rates are falling,then,ceteris paribus,

Question

Quizplus · Accepted Answer

When interest rates fall, bond prices tend to rise as investors are willing to pay more for a fixed income stream. This happens because the lower interest rate environment increases the demand for fixed-income instruments, pushing up the prices of bonds. This inverse relationship between bond prices and interest rates is a fundamental principle in finance. Therefore, option A is incorrect because bondholders will be seeing increases in the value of their bonds. Option C is incorrect because lower interest rates often lead to more liquidity in the market, as borrowing becomes cheaper. Option D is incorrect because there is no direct relationship between interest rates and income levels.

If Interest Rates Are Falling,then,ceteris Paribus