Economics · Financial Markets
Consider the following statements regarding bond dynamics: Statement I: Bond yields tend to rise when the prices of bonds fall in the secondary market. Statement II: Bond yield is inversely related to the bond price and is directly calculated as the ratio of the bond's face value to its coupon rate. Which one of the following is correct in respect of the above statements?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Both Statement I and Statement II are correct, and Statement II is the correct explanation for Statement I.
- 2Both Statement I and Statement II are correct, but Statement II is not the correct explanation for Statement I.
- 3Statement I is correct, but Statement II is incorrect.✓
- 4Statement I is incorrect, but Statement II is correct.
Correct answer
Statement I is correct, but Statement II is incorrect.
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