The Price of Bonds and the Interest Rate Are

question 120

Multiple Choice

The price of bonds and the interest rate are

• A) inversely related.
• B) positively related.
• C) unrelated.
• D) related, but we are not sure how.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuer, which is the amount paid to the holder at maturity for bonds, or the nominal value of a share.

Semiannual Coupon Bond

A type of bond that pays interest to its holder twice a year at regular intervals.

Market Interest

Refers to the general level of interest rates in the market at any given time, affecting how much it costs to borrow money or the returns on investments.

Substitute Good

A product or service that consumers can use in place of another product or service, often when prices rise or the original becomes unavailable.