What happens when you get less?
Quantitative Finance
Level
2
What happens to the price of a bond as it's yield increases?
Price goes up since it pays more
Price will fluctuate before moving in an unknown direction
Price stays constant as the yield doesn't matter
Price goes down since payments are fixed
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1 solution
When interest rates rise, the prices of bonds in the market fall, thereby raising the yield. This clearly shows that price of a bond has to go down as all payments are fixed.