Series 7 practice questioneasyDebt Securities 80
When market interest rates rise sharply, outstanding bond prices generally:
- Arise
- Bfall✓ Correct answer
- Cremain fixed at par
- Dbecome callable immediately
Explanation
Why B — fall
Bond prices move inversely to interest rates. When new bonds offer higher yields, existing lower-coupon bonds usually decline in price to remain competitive.
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