A bond with no expiration date is priced at $10,000 when the interest rate in the economy is 6%. If the interest rate falls to 5.5%, then this bond's price would decrease.

Question

Quizplus · Accepted Answer

When interest rates fall, the price of bonds tends to increase. Therefore, if the interest rate falls from 6% to 5.5%, the price of the bond with no expiration date would likely increase rather than decrease.

A Bond with No Expiration Date Is Priced at $10,000