If interest rates in the overall economy decrease,what will happen to the market value of a corporate bond with a fixed interest rate?
A)The bond will lose all its value.
B)The value of the bond will increase.
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,decrease,or remain constant.

Question

Quizplus · Accepted Answer

When interest rates in the overall economy decrease, the market value of existing bonds with fixed interest rates increases. This is because the fixed interest payments of the bond become more attractive compared to the new bonds issued at the lower current interest rates, leading to higher demand and increased market value for the existing bonds.

If Interest Rates in the Overall Economy Decrease,what Will Happen