1. The market value of a bond is ___ a. directly related to the rate of interest
ID: 1113938 • Letter: 1
Question
1. The market value of a bond is ___
a. directly related to the rate of interest on the bond
b. inversely related to the rate of interest on the bond
c. not related to the rate of interest on the bond
d. directly related to the maturity date of the bond
e. inversely related to the maturity date of the bond
2. A labor union is a group of:
a. employees who join together to improve their working conditions
b. firms that join together to hire workers
c. firms that work together to negotiate better prices in the market
d. farmers who work together to receive better prices for their agricultural products
e. workers and firm owners who join together to improve working conditions.
Explanation / Answer
1. The market value of a bond is ___ a. directly related to the rate of interest on the bond
Explanation: A bondholder is periodically paid interest on the bond. The rate at which the bondholder is paid is the interest rate on the bond or the coupon rate. If the interest rate of the bond is higher, its demand too will be higher and so will be its market value. Also, when the interest rate on the bond goes lower, its market value will also go lower. So, there is a direct relation between the market value and the interest rate of the bond.
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