Investment VehiclesPregunta 20 de 110
If interest rates rise, what generally happens to the price of an outstanding fixed-rate bond?
a.The price rises proportionally with rates
b.The price is unaffected because the coupon is fixed
c.The bond automatically converts to a floating rate
d.The price falls
Explicación
Bond prices move inversely to interest rates, so when rates rise, existing fixed-rate bond prices fall. This inverse relationship is a core principle of fixed income. Longer-duration bonds fall more sharply than shorter-duration bonds for the same rate increase.
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