What Is the Inverse Relationship Between Bond Prices and Interest

question 50

Multiple Choice

What is the inverse relationship between bond prices and interest rates?

• A)When interest rates go up,bond prices fall; when interest rates go down,bond prices increase.
• B)When interest rates go down,bond prices fall; when interest rates go up,bond prices increase.
• C)When interest rates go up,bond prices increase; when interest rates go down,bond prices increase.
• D)There is no inverse relationship between bond prices and interest rates.

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Definitions:

Equilibrium Price

The cost at which the amount of a product or service that consumers want to buy matches the amount available, leading to equilibrium in the market.

Government Revenue

The income received by the government from taxes and non-tax sources like charges for services and customs duties.

Price Ceiling

A government-imposed limit on how high a price of a good or service can be charged in the market.

Demand

The quantity of a product or service that consumers are willing and able to purchase at various prices during a given period.