What happens when happens when interest rate (i.e. yield-to-maturity) decreases on a bond? A. The price of the bond increases. B. The coupon rate of the bond increases. C. The par value of the bond decreases. D. The coupon payments are adjusted to the new discount rate.
The interest rate of a bond is known as the Yield to Maturity. This is a Market Rate and when the Yield to Maturity increases, the Coupon rate must increase as well.
