Interest Rates And Bond Prices

This problem practices a core fixed income concept that interviewers expect candidates to know cold, the inverse relationship between market interest rates and bond prices. A strong answer should explain the economic logic behind that relationship, including how new yields available in the market affect the relative attractiveness of existing bonds and why investors demand a price adjustment to hold older securities. Interviewers ask this because it tests whether a candidate understands basic pricing mechanics, interest rate sensitivity, and the link between market conditions and security valuation, which are essential in capital markets conversations.