If overall interest rates in the economy decrease, a corporate bond with a fixed interest rate will generally
A)increase in value.
B)decrease in value.
C)remain unchanged.
D)become worthless.
E)be returned to the corporation.

Question

Quizplus · Accepted Answer

When overall interest rates decrease, the fixed interest rate on a corporate bond becomes relatively more attractive, which leads to an increase in demand for the bond and a rise in its market value. Therefore, a corporate bond with a fixed interest rate will generally increase in value when interest rates decrease.

If Overall Interest Rates in the Economy Decrease, a Corporate