How are Treasury bond prices affected when the interest rate falls?
A. The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
B. The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase.
C. The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
D. The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase.
Answer: B
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