Interest rates and stock prices move:

A) randomly exhibiting no causal relationship.
B) in opposite directions.
C) up and down together.
D) None of the above

Interest rates and stock prices generally move in opposite directions. When interest rates are high, borrowing becomes expensive, and this reduces consumer and business spending. As a result, corporate earnings decrease, and stock prices fall. Conversely, when interest rates are low, borrowing becomes cheaper, and this boosts consumer and business spending. This, in turn, leads to higher corporate earnings and a rise in stock prices. Therefore, there is an inverse relationship between interest rates and stock prices.