Final answer:
A zero-coupon bond most likely earns interest on an implied basis, accruing interest over time rather than paying it out periodically. If interest rates rise, such a bond would typically be purchased for less than its face value, whereas if rates fall, it might sell for more.
Step-by-step explanation:
The type of bond that most likely earns interest on an implied basis is a zero-coupon bond. Unlike typical bonds that pay periodic interest payments, zero-coupon bonds are purchased at a discount to their face value and do not pay interest until maturity. At maturity, the holder receives a payment that is equal to the original principal plus the accumulated interest over the life of the bond. This accumulated interest is the implied interest that the bond earns.
If interest rates increase, investors would generally expect to pay less than the original $10,000 for the bond, because the bond's fixed returns become less attractive in comparison to new bonds issued at the higher current rates, which would offer higher returns. Conversely, if interest rates decrease, the existing bond with a fixed return becomes more attractive, and investors might be willing to pay more than $10,000 to acquire it.
Bond yields for different types of bonds, such as Treasury bonds and corporate bonds, can vary based on their credit ratings and associated risk. Interest rates affect the price investors are willing to pay for bonds; as rates rise, bond prices typically fall and vice versa.