Which of the following is a true statement about the relationship between the price of bonds and the interest rate?

Question

Quizplus · Accepted Answer

The price of bonds and the interest rate have an inverse relationship. When the interest rate rises, the price of bonds falls, and when the interest rate falls, the prices of bonds rise. This is because when the interest rate rises, investors can earn a higher return on their investments in other vehicles, making previously issued bonds less attractive, so their prices fall to increase the yield. Conversely, when the interest rate falls, investors seek to invest in the previously issued bonds to lock in higher yields, so their prices rise.

Which of the Following Is a True Statement About the Relationship