Which of the following will result in a decrease in the pric

Which of the following will result in a decrease in the price of an existing corporate bond?

A.lower expectations of inflation

B.new bonds issued at a lower interest rate

C.increased default risk

D.all of the above

Solution

Correct option is > C. increased default risk

Reasons:

If default risk of bond increases then the bond price will fall.

Falling inflation will increase the bond price.

Lower interest on similar bond will give rise to old bond price.