A rise in the market rate of interest will cause the value of a financial instrument such as a bond to rise.

Question

Quizplus · Accepted Answer

When the market rate of interest rises, the value of existing bonds decreases. This is because new bonds are issued at a higher rate of interest, making existing bonds with lower rates of interest less attractive to investors. Therefore, the value of a bond will fall, not rise, when market interest rates increase.

A Rise in the Market Rate of Interest Will Cause