n NISM Certifications
V-A NISM Series V-A
Medium

An existing bond fund will tend to lose value when market interest rates _______.

Practice question from Nism VA Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. Rise

    Correct answer

  2. B

    Fall

  3. C

    Remain constant

  4. D

    Are equal to yields

Why this is the answer

Bond prices are inversely related to interest rates. When market interest rates rise, the price of existing bonds falls because new bonds are issued at higher yields, making the older bonds less attractive.

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