What effect would a 100 basis point drop in yield have on bond prices?

A) It would have a larger impact on bond prices when yields are high.
B) It would have a larger impact on bond prices when yields are low.
C) It would have the same impact on bond prices regardless of whether yields are high or low.
D) It would cause bond prices to fall in general.

Basis Point

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equal to 1/100th of 1%.

Bond Prices

The cost or value of a bond, which can fluctuate based on interest rates, credit quality of the issuer, and other factors.

Yields

Yields refer to the earnings generated and realized on an investment over a particular period, expressed as a percentage based on the investment’s cost, its current market value, or its face value.