As interest rates,and consequently investors' required rates of return,change over time,the ________ of outstanding bonds will also change.

Question

Quizplus · Accepted Answer

The price of outstanding bonds will change as interest rates change. This is because the price of a bond is inversely related to its yield. When interest rates rise, the yield on existing bonds becomes less attractive, causing their prices to fall. Conversely, when interest rates fall, the yield on existing bonds becomes more attractive, causing their prices to rise. Therefore, the correct answer is D.

As Interest Rates,and Consequently Investors' Required Rates of Return,change Over