With respect to bonds,when interest rates increase typically:
A) the coupon rate on existing bonds also increases.
B) the coupon rate on existing bonds remains unchanged.
C) bond prices also increase.
D) bond prices remain constant.

Question

Quizplus · Accepted Answer

When interest rates increase, the coupon rate on existing bonds remains unchanged. This is because the coupon rate is fixed at the time the bond is issued and cannot be changed.

With Respect to Bonds,when Interest Rates Increase Typically