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If interest rates in the market fell to 3 percent, how would this affect the value of this bond?

A. For a moment it might rise, but in the long term it would fall to market value.
B. It would drop in value, then return to its original value.
C. It would rise in value, since it pays a higher interest rate than the market.
D. It would remain unchanged, since market rates do not affect values of bonds.
E. It would fall in value, since the market rates have fallen.

Sagot :

GinnyAnswer

Final answer:

If the market interest rate fell to 3%, the value of the bond would rise.


Explanation:

If the market interest rate fell to 3%, the value of the bond would rise. When market interest rates decrease, the bond becomes more valuable as it offers a higher interest rate than the market rate.


Learn more about bond valuation here:

https://brainly.com/question/34548471


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