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

Question

Quizplus · Accepted Answer

When the interest rate on newly issued bonds increases, the price of existing bonds decreases. This is because new bonds with higher interest rates become more attractive to investors, leading to lower demand for existing bonds with lower interest rates. As a result, bond prices must decrease in order to create a yield that is comparable to the new, higher interest rates being offered by the newly issued bonds.

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