You currently hold a bond from Marriott International that pays you 8 percent. If interest rates rise the price of your bond will:
A)increase.
B)decrease.
C)only decrease if interest rates go above 8 percent.
D)be unchanged because the price depends on the risk of the company.

Question

Quizplus · Accepted Answer

When interest rates rise, newer bonds paying higher interest become available in the market, making the current bonds less attractive to investors. Therefore, the demand for the current bond decreases, leading to a decrease in its price.

You Currently Hold a Bond from Marriott International That Pays