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26 December, 01:05

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value. true or false

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  1. 26 December, 01:49


    The statement is false, as a decrease in the overall interest rate increases the overall worth of a bond which pays fixed interest rate payments. The public will demand more bonds with fixed interest rate payments, and the demand for bonds with flexible interest payments will decrease likewise. This is the main reason why the face value of bonds with fixed interest rate payments is usually higher than flexible bonds because they are less risky.
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