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Quiz: Think You Understand Markets? Prove It

Question 4 of 14

In general, if interest rates go down, then bond prices…

  1. Go down
  2. Go up
  3. Are not affected
  4. Don't know/Not sure
Correct!

The cardinal rule of bonds: When interest rates fall, bond prices rise, and when interest rates rise, bond prices fall. 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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