An increase in the market interest rates will generally cause the price a corporate bond with...

An increase in the market interest rates will generally cause the price a corporate bond with a fixed coupon rate to:

a) become worthless

b) decrease in value

c) remain unchanged

d) increase in value

Expert Solution

The increase in the market interest rate will generally cause the price of the corporate bonds which have a fixed interest rate , DECREASE in value as fixed interest bonds will be subject to to become less attractive once the market rate of interest are going to go up so it would be leading to lower attractiveness of the bonds and it will be resulting in to decrease in the price of the bonds.

Correct answer will be option (B) Decrease in Value.

jeff jeffy answered 2 years ago

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