If you initially pay $1,000 for a bond with an annual interest rate of 5 percent, but then the market interest rate rises to 6 percent,

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Quizplus · Accepted Answer

When market interest rates increase, the value of existing bonds (with lower interest rates) decreases. Therefore, the market price of the bond will decrease. Additionally, the annual interest payment of $50 remains unchanged as it is based on the bond's face value and interest rate at the time of issuance.

If You Initially Pay $1,000 for a Bond with an Annual