Asked by Glòria Rivera Bataller on May 01, 2024
Verified
All else the same, if interest rates fall, then bond prices will rise.
Interest Rates
The cost of borrowing money or the return on investment for savings, usually expressed as a percentage of the principal amount on an annual basis.
Bond Prices
The market price at which a bond is traded, influenced by interest rates, credit ratings, and the bond's term to maturity.
- Ascertain the effects fluctuating interest rates have on bond prices and the corresponding payments.
Verified Answer
ZK
Zybrea KnightMay 06, 2024
Final Answer :
True
Explanation :
When interest rates fall, existing bonds with higher interest rates become more valuable, leading to an increase in their prices since they offer better returns compared to new bonds issued at the now lower rates.
Learning Objectives
- Ascertain the effects fluctuating interest rates have on bond prices and the corresponding payments.