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

An ongoing bond fund will lose value when the interest rates in the market ______ .

Practice question from Nism VA Mock Test 3 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. Rise

    Correct answer

  2. B

    Fall

  3. C

    Remain same

  4. D

    Will be equal to yields

Why this is the answer

When interest rates rise, the price of existing bonds tends to fall. This is because newer bonds offer higher yields, making the older bonds with lower yields less attractive, thus reducing their market value.

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