If interest rates in the overall economy increase, what will happen to the market value of a corporate bond with a fixed interest rate?
A)The value of the bond will increase.
B)The bond is worthless.
C)The value of the bond will decrease.
D)The value of the bond will not change.
E)It is impossible to determine if the bond's value will increase or decrease.

Question

Quizplus · Accepted Answer

When interest rates in the overall economy increase, the market demand for bonds with lower fixed interest rates decreases. Hence, the value of the bond with a fixed interest rate will decrease. Therefore, choice C is the best answer.

If Interest Rates in the Overall Economy Increase, What Will