As interest rates consistently decline over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.)

Question

Quizplus · Accepted Answer

As interest rates decline, the market demand for existing bonds with higher coupon rates (which were issued when rates were higher) increases, driving up their prices. Since the bond would have a fixed coupon rate, its value would increase as the interest rates decline.

As Interest Rates Consistently Decline Over a Specific Period, the Market