Question

If the market price of a bond​ increases, then the​ bond's ____________ will decrease.

If the market price of a bond​ increases, then the​ bond's ____________ will decrease.

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Answer #1

Bonds have an inverse relationship with interest rates. When interest rate decrease, the price of the bond increases and when interest rate increase, the price of the bond decreases.

This is because the bond becomes attractive at the low interest rate and so the price of the bond increases because of the increased demand.

Hence, If the market price of bond increases, then the bond's yield to maturity will decrease.

In case of any query, kindly comment on the solution.

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