Finance Brain
Courses
Home
Sign in
← The Price-Yield Relationship
1 / 4
Question
Why does a bond's price fall when market interest rates rise?
1
Regulators require bond prices to adjust when central bank policy changes
2
Rising rates signal economic weakness, reducing the issuer's creditworthiness
3
Bond prices fall when rates rise because demand for bonds increases, pushing prices down
4
The bond's fixed future cash flows are worth less in present value terms when discounted at a higher rate, so the price must fall to remain competitive with new higher-yielding bonds
Press 1–4 to pick an answer
Finance Brain