Which of the following describes the relationship between changes in market interest rates and the market value of bonds?

A) When interest rates increase, bond prices increase.
B) When interest rates decrease, bond prices decrease.
C) When interest rates increase, bond prices decrease.
D) When interest rates decrease, bond prices increase.
E) Both c. and d. are correct.

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Final Answer : E, Explanation :  The relationship between interest rates and bond prices is inversely proportional. When market interest rates increase, existing bonds with lower interest rates become less attractive, leading to a decrease in their market value (C). Conversely, when market interest rates decrease, existing bonds with higher interest rates become more attractive, leading to an increase in their market value (D).

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