Which of the following statements is TRUE?
A)A fall in bond prices causes interest rates to fall.
B)A fall in interest rates causes a fall in bond prices.
C)A rise in interest rates causes bond prices to fall.
D)Bond prices change independently of interest rates.
E)Interest rates change independently of bond prices.

Question

Quizplus · Accepted Answer

There is an inverse relationship between bond prices and interest rates. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. Therefore, choice C is true. Choices A, D, and E are incorrect as they do not follow this relationship, and choice B is false as a fall in interest rates would typically lead to rising bond prices.

Which of the Following Statements Is TRUE