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2.4 Financial markets and monetary policy (A-level only)

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Question 40

In 2019, a major UK infrastructure developer issued a corporate bond with a face value of £5,000\pounds5,000£5,000, paying a fixed annual coupon of £300\pounds300£300. By 2023, due to monetary policy tightening, the market interest rate for debt of comparable risk had risen to 8%. Which of the following describes the most likely movement in the market price of this bond and its current yield compared to their levels at issue?

A

The market price of the bond will have risen, and its yield will have decreased.

B

The market price of the bond will have fallen, and its yield will have increased.

C

The market price of the bond will have fallen, and its yield will have decreased.

D

The market price of the bond will have remained unchanged, and its yield will have increased.

Markscheme

2.4 Financial markets and monetary policy (A-level only) Questions

  1. A Level
  2. /Economics
  3. /2.4 Financial markets and monetary policy (A-level only)

176 exam-style questions on AQA A Level Economics 2.4 Financial markets and monetary policy (A-level only), covering 2.4.1 The structure of financial markets and financial assets, 2.4.2 Commercial banks and investment banks, 2.4.3 Central banks and monetary policy, and 2.4.4 The regulation of the financial system. Each one has a worked solution and a mark scheme showing where the marks go.

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