There is a negative relationship between interest rates and bond prices.

Question

Quizplus · Accepted Answer

When interest rates increase, the yield on existing bonds becomes less attractive to investors as new bonds become available with higher yields. As a result, the demand for existing bonds decreases, which in turn lowers their prices. Conversely, when interest rates decrease, the yield on existing bonds becomes more attractive, leading to increased demand and higher prices. Therefore, there is an inverse relationship between interest rates and bond prices.

There Is a Negative Relationship Between Interest Rates and Bond