If Interest Rates in the Overall Economy Decrease to 6

Multiple Choice

If interest rates in the overall economy decrease to 6 percent, which one of the following is most likely to be the market value of a $1,000 corporate bond with a fixed interest rate of 7 percent?

A) $400
B) $1,100
C) $900
D) $1,000
E) $700
Since the market rate is less than the coupon rate, the market price should exceed $1,000.