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Personal Finance

Quiz: Are You Financially Responsible?

Question 3 of 5

If interest rates rise, what will typically happen to bond prices? Rise, fall, stay the same, or is there no relationship?

  1. Rise
  2. Fall
  3. Stay the Same
  4. No Relationship
Correct!

When interest rates rise, bond prices fall. And when interest rates fall, bond prices rise. This is because as interest rates go up, newer bonds come to market paying higher interest yields than older bonds already in the hands of investors, making the older bonds worth less.

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