Question

A higher interest rate (discount rate) would:________

A) Reduce the price of corporate bonds.
B) Reduce the price of preferred stock.
C) Reduce the price of common stock.
D) all of the above.

Answer 1

Answer: C) Reduce the price of common stock.

Step-by-step explanation:

A Rise in interest rates would tend to contradict the economy. Because Everyone cuts back on thier spending because there is less money to spend. This results in earnings falling or dropping, next affected are stock prices. Conversely, when rates drops everyone has more money to spend and earnings tend to rise along with prices.