Q366
Prices of bonds will be increased if interest rates
A.
equals
B.
lump sum declines
C.
rises
D.
declines
AnswerAnswer: Option D
Solution
Answer: Option D
Solution:
Prices of bonds will be increased if interest rates declines. Bond price is the present discounted value of future cash stream generated by a bond. It refers to the sum of the present values of all likely coupon payments plus the present value of the par value at maturity.