Question

Why does a bond's price decrease when interest rates increase?

Answer 1

Bond prices decrease when interest rates increase because the fixedinterest and principal payments stated in the bond will become less attractive to investors. ... However, if the marketinterest rates increase to 10% the investor will now be able to earn $5,000 semiannually on a $100,000 investment.

Answer 2

A bond's price decrease when interest rates increase because of the inversely proportionàlity of bond price with interest rates.This indicated that there is increase with the decrease of 1 quantity.