Financial Planner

Answer: D - Interest rates have an inverse relationship with both bonds and stocks. This is to say, when the market interest rates increase, the prices of bonds and stock go down. When market interest rates droop, the prices go up. The inverse relationship between market yields and bond process is extended to a bond’s coupon. It market yields fall below a bond’s coupon, the price of the bond will always exceed its par value. The bond is said to trade at a premium. In contrast, when market yield rises above coupons, the price of a bond is always less than its par value and said to be trading at a discount.