Question

Prices of existing bonds move _________ as market interest rates move _________.

a) down, down
b) up, down
c) Bond prices don't move as market interest rates move.

Answer 1

The answer is B.

Step-by-step explanation:

Bonds prices and market interest rates are negatively correlated i.e if the market interest rate(yield-to-maturity) of a bond goes up, the price of the bond goes down and if the yield-to-maturity(interest rate) rate goes down, the price of the bond goes up.

Usually, bonds with high interest rate are riskier than bonds with low interest rate.