Read the two statements and choose the correct option.
I. When market interest rates rise, the prices of existing bonds fall.
II. A bond's yearly coupon payment changes whenever market interest rates change.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

I: the fixed coupons are now worth less against new bonds paying more, so the price falls. True.
II: the coupon is fixed by the coupon rate and face value when the bond is issued. False.

Ten questions from Perpetuity, Sinking Funds & Bonds, at your own pace.

Ten questions from Perpetuity, Sinking Funds & Bonds, at your own pace.

Read the two statements and choose the correct option.I. When market interest rates rise, the prices of existing bonds fall.II. A bond's yearly coupon payment changes whenever market interest rates change.