What would cause a corporate bond with a $1,000 face value and a fixed interest rate of 7 percent to increase in value?
A) The bond receives a lower rating by Moody's or Standard & Poor's.
B) Overall interest rates in the economy increase.
C) The government places an interest ceiling on corporate bonds.
D) Overall interest rates in the economy decrease.
E) The corporation files for protection under the bankruptcy laws.

Question

Quizplus · Accepted Answer

When overall interest rates in the economy decrease, the fixed interest rate of 7 percent on the corporate bond becomes more attractive to investors, causing an increase in demand for the bond and, consequently, an increase in its value.

What Would Cause a Corporate Bond with a $1,000 Face