Q91
If market interest rates are expected to rise, you would expect___________.
A.
bond prices to fall more than stock prices
AnswerB.
bond prices to rise more than stock prices
C.
stock prices to fall more than bond prices
D.
stock prices to rise and bond prices to fall.
Answer: Option A
Solution
Answer: Option A
Solution:
If market interest rates are expected to rise, you would expect bond prices to fall more than stock prices. The prevailing rate of interest offered on cash deposits, determined by demand and supply of deposits and based on the duration (the longer the duration, the higher the rate) and amount (the higher the amount, the higher the rate) of deposits.