If market interest rates rise, what is the effect on the price of existing fixed-rate bonds?

💡 Explanation:

Bond prices and interest rates have an inverse relationship. When market interest rates rise, existing bonds that offer a lower, fixed coupon rate become less attractive to investors. To make them competitive in the secondary market, their price must fall, which effectively increases the bond’s yield (yield-to-maturity) to align with the new, higher market rates.