If market interest rates increase, investors in corporate bonds will see the current market value of...
If market interest rates increase, investors in corporate bonds will see the current market value of their bonds do what in the secondary market?
a. If the market interest rates increase, the coupon rate on the bond increases
b. When market interest rates increase, the market value of corporate bonds increase
c. Remain the same, because the face value never changes
d. When market interest rates increase, the market value of corporate bonds decrease
Homework Answers
Bond price and interest rate has inverse relationship. If interest rate decrease, bond price will increase and vice-versa. If interest rate equals bond price, bond will sell at par.
Hence, correct option is “d. When market interest rates increase, the market value of corporate bonds decrease”
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