Given an Understanding of Interest-Rate Risk, an Existing Fixed-Interest Investor

question 6

Multiple Choice

Given an understanding of interest-rate risk, an existing fixed-interest investor in bonds would be affected in which of the following way(s) if the market interest rates on bonds were to rise from 8% to 10%?

• A) interest receipts from the bonds would rise and the market price of the bond would also rise
• B) interest receipts from the bonds would fall and the market price of the bond would also fall
• C) interest receipts from the bonds would be unaffected and the market price of the bond would rise
• D) interest receipts from the bonds would be unaffected and the market price of the bond would fall