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Assessing the Relationship Between Interest Rates and Bond Price

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Market interest rates and bond prices are:

a. unrelated.
b. inversely related.
c. directly related
d. usually the same

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Solution Preview

Market interest rates and bond prices are:

a. unrelated.
b. inversely related.
c. directly related
d. usually the same

Answer: B - inversely related.

Bond prices move inversely to interest rates. When interest rates go up, bond prices go down and when interest rates go down, bond prices go up. Remember, we're talking about previously issued bonds ...

Solution Summary

This solution helps with a problem assessing the relationship between interest rates and bond price.

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