There is an inverse relationship between interest rates and bond values.

Question

Quizplus · Accepted Answer

When interest rates rise, the present value of future cash flows from bonds decreases, which results in a decrease in bond values. On the other hand, when interest rates fall, the present value of future cash flows from bonds increases, resulting in an increase in bond values. Therefore, there is an inverse relationship between interest rates and bond values.

There Is an Inverse Relationship Between Interest Rates and Bond