When the coupon rate on newly-issued bonds decreases from 6% to 5%, the prices of existing bonds:

Question

Quizplus · Accepted Answer

When the coupon rate on newly-issued bonds decreases, it means that investors can expect lower returns on new bonds. As a result, they may turn to existing bonds with higher coupon rates, driving up demand and prices. Therefore, existing bond prices would increase when coupon rates on newly-issued bonds decrease.

When the Coupon Rate on Newly-Issued Bonds Decreases from 6