Products & Their RisksQuestion 34 of 398
When market interest rates rise, the prices of existing fixed-rate bonds generally:
a.Rise
b.Fall
c.Stay the same
d.Rise then immediately fall to par
Explanation
Bond prices and interest rates move inversely, so when market rates rise, existing bonds with lower fixed coupons become less attractive and their prices fall. They do not rise or stay unchanged with a rate increase.
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