A fortunate investor purchases a bond with a 10% return and watches interest rates fall to 5%.

Name: A fortunate investor purchases a bond with a 10% return and watches interest rates fall to 5%.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When interest rates fall, bond prices increase. The fortunate investor will be able to sell their bond at a premium price because of the higher interest rate it offers compared to newly issued bonds with lower rates. This results in an overall gain for the investor.

A Fortunate Investor Purchases a Bond with a 10% Return