(I)To sell an old bond when interest rates have risen,the holder will have to discount the bond until the yield to the buyer is the same as the market rate.
(II)The risk that the value of a bond will fall when market interest rates rise is called interest-rate risk.

Question

Quizplus · Accepted Answer

Both statements are true. The first statement accurately describes the process of adjusting the price of an old bond to make its yield competitive with current market rates when interest rates have risen. The second statement correctly identifies the concept of interest-rate risk, which is the risk that a bond's value will decrease as a result of rising market interest rates.

(I)To Sell an Old Bond When Interest Rates Have Risen,the