Question

Assuming all else stays equal, when interest rates rise Select one: a. bond prices go up....

Assuming all else stays equal, when interest rates rise

Select one:

a. bond prices go up.

b. bond prices go down.

c. bond prices may go up or down, depending on whether it is a premium bond or a discount bond.

d. bond prices may go up or down, depending on the time to maturity of the bonds.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Solution:-

Assuming all else stays equal, when interest rates rise then Bond Prices go down. Interest Rate and Bond prices have inverse relationship. When Interest Rate rises, Bond Prices will be fall and when Interest Rate fall, Bond Prices will be Increase.

Most of the Bonds pays fixed Interest Rate that became or demanding more if Interest rate falls as that more investors Demand that will drive up the price of the Bond.

If Interest Rate rises, investor will not prefer the lower interest rate paid by bond as price of the bond are declinning.

The Correct Answer is point B i.e. Bond Price goes down.

If you have any query related to question then feel free to ask me in a comment.Thanks.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
a.) All else equal, as yields go down, bond duration goes _________ (up/down). This means that...
a.) All else equal, as yields go down, bond duration goes _________ (up/down). This means that the bond price becomes ________ (more/less) sensitive to changes in interest rates as yields are lower, all else equal. b.) All else equal, as coupon rates go down, bond duration goes ________ (up/down). This means that the bond price becomes ________ (more/less) sensitive to changes in interest rates as coupon rates are lower, all else equal. c,) All else equal, as time to maturity...
Fill in the Blanks a.) All else equal, as yields go down, bond duration goes _________...
Fill in the Blanks a.) All else equal, as yields go down, bond duration goes _________ (up/down). This means that the bond price becomes ________ (more/less) sensitive to changes in interest rates as yields are lower, all else equal. b.) All else equal, as coupon rates go down, bond duration goes ________ (up/down). This means that the bond price becomes ________ (more/less) sensitive to changes in interest rates as coupon rates are lower, all else equal. c,) All else equal,...
Which of the following statements is most INCORRECT? Select one: a. All else equal, an increase...
Which of the following statements is most INCORRECT? Select one: a. All else equal, an increase in the required rate of return will result in a decrease in bond price. b. All else equal, you expect a capital loss on this bond investment at maturity. c. This is a premium bond because its required rate of return is smaller than the coupon rate. d. If the bond is callable, the YTC is a better estimate of this bond's expected return....
Compare the coupon rates on the following pairs of bonds assuming all else equal. A debenture...
Compare the coupon rates on the following pairs of bonds assuming all else equal. A debenture ______mortgage bond; a bond with a sinking fund ________ one without a sinking fund. Group of answer choices <, > >, > >, < <, <
Let’s assume that you are a bond investor. Why do bond prices go down when interest...
Let’s assume that you are a bond investor. Why do bond prices go down when interest rates go up? Don’t you like to receive higher interest rates? (LO 10-2)
The Fisher Effect refers to Select one: A. the value of bonds rising when interest rates...
The Fisher Effect refers to Select one: A. the value of bonds rising when interest rates fall. B. higher expected inflation changes both bond demand and supply. The shifts in demand and supply reinforce each other to result in higher nominal interest rates. C. higher interest rates on longer maturity financial instruments. D. higher expected inflation changes both bond demand and supply, but whether nominal interest rates rise or fall depends on which curve, demand or supply, shifts more.
11. ____ is the return of the bond when held to maturity. Select one: a. Discount...
11. ____ is the return of the bond when held to maturity. Select one: a. Discount rate b. Yield to maturity c. Nominal rate d. Coupon rate 12. The expected return of a stock for a year is equal to expected dividend plus ____ divided by purchase price of the stock. Select one: a. capital gain or loss b. purchase price c. expected price d. current price 13. A manager of a bond portfolio, with the expectation of a fall...
Question 1 The price of an outstanding bond will decline when Select one: a. the current...
Question 1 The price of an outstanding bond will decline when Select one: a. the current level of interest rate increases. b. there is an increase in the demand for the bond. c. the current level of interest rate declines. d. the yield is equal to the coupon rate. Question 2 When a bond sells below its par value, it is called Select one: a. par value bond. b. discount from par. c. market value bond. d. premium above par....
1. Which of the following is the most likely to happen if interest rates (and thus...
1. Which of the following is the most likely to happen if interest rates (and thus bonds yields) were to go up? a. Bond prices would also increase. b. Bond coupon rates would decrease. c. Face value of bonds would also increase. d. Bond prices would go down. e. Nothing, since interest rates don't affect bond prices. 2. Which of the following is the correct description of a bond with a coupon rate of 5% and YTM of 4%? a....
1a. As the maturity of the loan increases, the interest rate quoted on that loan increases...
1a. As the maturity of the loan increases, the interest rate quoted on that loan increases because of the increase in maturity premium. True False 1b. Which of the following is correct for the company's bond price when the default risk of that company increases (when the future prospect of the company becomes poor)? YTM increases therefore the price of the bond increases YTM decreases therefore the price of the bond decreases YTM decreases therefore the price of the bond...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT