If a Bond Pays a Fixed Return of $500 a Year

Multiple Choice

If a bond pays a fixed return of $500 a year and the current interest rate has risen from 5 percent to 10 percent, then the bond price must have:

A) risen from $25 to $50.
B) fallen from $50 to $25.
C) risen from $5, 000 to $10, 000.
D) fallen from $10, 000 to $5, 000.
E) risen from $1, 000 to $5, 000.