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The Walthers Company has a semi-annual coupon bond outstanding. An increase in the market rate of interest will have which one of the following effects on this bond? a. increase the coupon rate. b. decrease
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The Walthers Company has a semi-annual coupon bond outstanding. An increase in the market rate of interest will have which one of the following effects on this bond?

a. increase the coupon rate.
b. decrease the coupon rate.
c. increase the market price.
d. decrease the market price.
e. increase the time period.

User Errata
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Answer:

The answer is D.

Step-by-step explanation:

An increase in the market rate of interest of a bond will decrease the market price of the bond. Market rate of interest of a bond is inversely related to the market price of the bond.

For example, A bonds is issued with a higher interest rate, the price of existing bonds will fall because the demand for this bond falls.

User Kostiantyn Koval
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