__________ have great impact on bond prices.
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A. B. C. D.B
The correct answer is B. Interest rate.
Interest rates have a significant impact on bond prices. When interest rates rise, the price of existing bonds falls, because investors can earn higher yields from new bonds issued at the higher interest rate. Conversely, when interest rates fall, the price of existing bonds increases, because investors are willing to pay more for a fixed rate of return.
This inverse relationship between bond prices and interest rates is known as interest rate risk. The longer the maturity of the bond, the greater the sensitivity to changes in interest rates. Therefore, long-term bonds are more sensitive to changes in interest rates than short-term bonds.
In addition to interest rate risk, bonds also carry credit risk, which is the risk of default by the issuer. Inflation risk is another risk associated with bonds, which is the risk that inflation will erode the purchasing power of the bond's future cash flows.
Stock options, weather conditions, and consumer prices do not have a direct impact on bond prices. Stock options are derivative securities that provide the right to buy or sell stocks at a predetermined price, weather conditions may affect certain industries or companies but not the overall bond market, and consumer prices may affect the economy and inflation, but they do not have a direct impact on bond prices.