If a Bond Pays a Fixed Return of $500 a Year

question 137

Multiple Choice

If a bond pays a fixed return of $500 a year and the current interest rate has risen from 5 percent to 10 percent, then the bond price must have:

• A)risen from $25 to $50.
• B)fallen from $50 to $25.
• C)risen from $5, 000 to $10, 000.
• D)fallen from $10, 000 to $5, 000.
• E)risen from $1, 000 to $5, 000.

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