If a $1,000 bond is issued with a coupon rate of 11% and the market interest rate drops to 7%, the trading price of that bond will drop.

Name: If a $1,000 bond is issued with a coupon rate of 11% and the market interest rate drops to 7%, the trading price of that bond will drop.
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Question

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When the market interest rate drops, the bond becomes more valuable because its coupon rate is higher than the prevailing rate. Therefore, the trading price of the bond is likely to increase, not drop.

If a $1,000 Bond Is Issued with a Coupon Rate