7. Suppose that interest rates increase. Assuming all other parameters that impa

Question

7. Suppose that interest rates increase. Assuming all other parameters that impact the price of bonds and stocks remain constant, what would you expect to happen to bond and stock prices?
a. Bond prices would increase and stock prices would decrease.
b. Bond prices would decrease and stock prices would decrease.
c. Bond prices would decrease and stock prices would increase.
d. Bond prices would increase and stock prices would increase.
e. Stock prices would increase. More information would be needed to determine the impact on bond prices.

Explanation / Answer

b. Bond prices would decrease and stock prices would decrease.

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