The price of a bond with a fixed coupon rate and the required return have a relationship that is best described as ________.

Question

Quizplus · Accepted Answer

The price of a bond and the required return have an inverse relationship. As the required return increases, the price of the bond decreases and vice versa. This is because investors will demand a higher return on their investment if the bond's coupon rate is lower than the current market rate, which results in a lower bond price. Therefore, the best choice is (D) inverse.

The Price of a Bond with a Fixed Coupon Rate