When the interest rate on newly issued bonds increases, the price of existing bonds:

Question

Quizplus · Accepted Answer

There is a negative relationship between interest rates and the price of previously issued bonds. This is because new bonds are now available with a higher rate of return, requiring a discount for existing bonds. This is very similar to the car or cellphone market, where older models are discounted when new better models become available.

When the Interest Rate on Newly Issued Bonds Increases, the Price