Refer to the given information. If the price of this bond falls by $200, the interest rate will:

Answer the question on the basis of the following information for a bond having no expiration date: bond price = $1,000; bond fixed annual interest payment = $100; bond annual interest rate = 10 percent.

Refer to the given information. If the price of this bond falls by $200, the interest rate will:

 

1) rise by 2.5 percentage points.
2) rise by 5 percentage points.
3) fall by 2.5 percentage points.
4) fall by 5 percentage points.

ANSWER

 

1) rise by 2.5 percentage points.