QFA Investment Practice Questions - QFA Investment (LIA IOB, Ireland) Exam

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An investor purchases an Irish government bond (Gilt) with a nominal value of €10,000 and a coupon rate of 4% per annum. If market interest rates rise, what is the most likely effect on the market price of this bond?

The market price of the bond will rise. The market price of the bond will fall. The market price of the bond will remain unchanged. The coupon rate of the bond will adjust upwards.

Correct Answer:

The market price of the bond will fall.

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