1 Answers: Why do bond prices decrease when interest rates rise?

Question

Have been pondering why bond prices seem to decrease whenever interest rates rise… anyone?

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Jane Thomas 4 months 1 Answer 39 views 0

Answer ( 1 )

  1. If market interest rates decrease, the value of a bond will increase since the bond’s stated fixed interest payments will be greater than the amounts available in new bonds issued at current market interest rates. (However, be aware that a bond’s call price can limit the amount of increase in market value.)

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