How Are Treasury Bond Prices Affected When the Interest Rate

question 6

Multiple Choice

How are Treasury bond prices affected when the interest rate rises?

• A)The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
• B)The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase.
• C)The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
• D)The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase.

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Definitions:

Balance Sheet

An account that outlines the financial position of a company, detailing its assets, liabilities, and owners' equity at a given point in time.

Income Statement

A financial statement that shows a company's revenue and expenses, and the resulting profit or loss, over a specific period.

Indirect Method

A method used in cash flow statements to adjust net income for the changes in non-cash accounts to arrive at operating cash flow.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.