A bond issuer agrees to pay a stated nominal amount each year.An increase in the nominal interest rate will cause
A) the price of the bond to fall.
B) the price of the bond to rise.
C) the nominal value of the bond's coupon to rise.
D) the nominal value of the bond's coupon to fall.

Question

Quizplus · Accepted Answer

An increase in the nominal interest rate will make the bond less attractive to investors as they can now earn a higher return elsewhere. As a result, they will demand a lower price for the bond, causing its price to fall.

A Bond Issuer Agrees to Pay a Stated Nominal Amount