If you buy for $100 a bond that pays 4.57 percent in annual interest and the current interest yield on the bond rises to 5.13 percent, then the price of the bond has fallen.

Question

Quizplus · Accepted Answer

When the interest yield on a bond rises, the bond's price falls. This is because the bond's fixed interest rate becomes less attractive compared to newly issued bonds with higher interest rates, leading to a decrease in demand for the existing bond and a subsequent decrease in its price. Therefore, if the current interest yield on a bond rises from the time it was purchased, its price will fall.

If You Buy for $100 a Bond That Pays 4