The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2

-When the interest rate on alternative investments rise, it becomes costly for the bondholders to retain their bonds with them.

Question

The figure given below shows the demand [D and D'] and supply [S and S'] curves of shares of stock.Figure 17.2
 
-When the interest rate on alternative investments rise, it becomes costly for the bondholders to retain their bonds with them.

Quizplus · Accepted Answer

When interest rates on alternative investments rise, the opportunity cost of holding bonds increases, as bondholders could potentially earn higher returns elsewhere.

The Figure Given Below Shows the Demand [D and D']