n NISM Certifications
X NISM Series X
Medium

When the market risk of a debt instrument increases, its price generally falls, leading to an increase in its yield. This inverse relationship reflects that higher market risk results in lower bond prices and higher yields, as investors demand more return for increased risk.

Practice question from NISM Series XIX A- Alternative Investments Funds (AIF) Distributors Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. The price will fall which will lead to an increase in its yield

    Correct answer

  2. B

    The yield will fall which will lead to an increase in its price

  3. C

    The price will get determined by the coupon rate

  4. D

    The market will discount the yield on the instrument

Why this is the answer

Rising market risk causes bond prices to decline and yields to rise, reflecting increased risk premium.

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NISM Series XIX A- Alternative Investmen…