Interest rates and the price of old or existing bonds are a. directly related. b. independent of each other. c. inversely related. d. sometimes directly related and sometimes inversely related. e. There is not enough information to answer the question.

Option C, “inversely related” is the correct answer.

Explanation:

Option “C” is the correct answer because if the interest rate on the bonds falls then its demand rises. Thus, its rising demand will derive up the price of bonds. If the interest rate rises then the demand for bonds will fall and this will reduce the price of bonds. Therefore, this condition shows the inverse relationship between the interest rate and bond price

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