CISI Bonds And Fixed Income Practice Questions - CISI Bonds And Fixed Income Exam

If market interest rates rise, what is the typical effect on the price of existing fixed-rate bonds?

The prices of existing bonds will increase to match the higher interest rates The prices of existing bonds will decrease to offer a competitive yield The prices of existing bonds will remain unchanged as the coupon rate is fixed The prices of existing bonds will become volatile but experience no net change

Correct Answer:

The prices of existing bonds will decrease to offer a competitive yield

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