[amp_mcq option1=”reduction in income” option2=”increment in income” option3=”matured income” option4=”frequent income” correct=”option1″]<\/p>\n
The correct answer is A. reduction in income.<\/p>\n
When interest rates fall, the value of existing bonds goes up. This is because investors are willing to pay more for a bond that offers a higher interest rate than the current market rate. As a result, bondholders who sell their bonds before they mature will receive a higher price than they would have if interest rates had been higher.<\/p>\n
However, bondholders who hold their bonds until they mature will receive a lower interest rate than they would have if interest rates had been higher. This is because the interest rate that is paid on a bond is fixed at the time the bond is issued. So, if interest rates fall after a bond is issued, the bondholder will receive a lower interest rate than they could have earned by investing in a new bond.<\/p>\n
In conclusion, falling interest rates lead to a reduction in bondholder income because the value of existing bonds goes up and the interest rate paid on new bonds goes down.<\/p>\n
Here is a brief explanation of each option:<\/p>\n
[amp_mcq option1=”reduction in income” option2=”increment in income” option3=”matured income” option4=”frequent income” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-54938","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n