Question

Bond :

A) prices are positively related to interest rates.
B) prices are not directly influenced by stock market conditions.
C) returns are usually higher than stock returns.
D) Both A and B are correct

Answer 1

Bonds are influenced by interest rates and not directly influenced by stock market conditions. Bond returns are usually lower than stock returns.

Step-by-step explanation:

Bonds are influenced by interest rates but not directly influenced by stock market conditions. This means that as interest rates rise, bond prices typically decrease and vice versa. On the other hand, stock prices are directly influenced by stock market conditions. Therefore, option B is correct.

Bond returns are usually lower than stock returns over a sustained period of time. Stocks have historically provided higher average returns compared to bonds. Bonds are considered a more conservative investment that offers lower returns but also lower risk.