The prices of financial securities are significantly influenced by the prevailing market interest rate. There is an inverse relationship between the prices of financial securities especially bonds and stocks and the prevailing interest rates. This implies that an increase in the interest rates will result in a decrease in the prices of bonds and stocks while a decrease in the prevailing rate of interest will result in an increase in prices of bonds and stocks.
When bonds are issued, they normally have a coupon rate that is equal to or close to the market interest rate prevailing at that time. Usually, the ...
