As Interest Rates Consistently Rise Over a Specific Period, the Market

question 23

Multiple Choice

As interest rates consistently rise over a specific period, the market price of a bond you own would likely ____ over this period. (Assume no major change in the bond's default risk.)

• A)consistently increase
• B)consistently decrease
• C)remain unchanged
• D)change in a direction that cannot be determined with the above information

---

Definitions:

Annual Coupon Payment

The yearly amount paid to a bondholder, usually based on the bond's face value and its stated interest rate.

Current Yield

The annual income (interest or dividends) divided by the current price of the security, typically used in reference to bonds.

Coupon Payment

A periodic interest payment to bondholders, typically paid semi-annually.

Priced

The process of determining the value of a financial instrument or asset, often based on market conditions and perceived value.