Question

The only reason why the price would fall on a corporate bond is if market interest rates increase.

A) True
B) False

Answer 1

The price of a corporate bond falls if market interest rates increase.

Step-by-step explanation:

The answer to the question is A) True. The price of a corporate bond is inversely related to market interest rates. When market interest rates increase, the price of existing bonds decreases. This is because investors can earn higher returns by purchasing newly issued bonds with higher interest rates instead of holding onto existing bonds with lower interest rates.