Andrew is contemplating selling the bonds he holds prior to their date of maturity. Which of the following may result in Andrew’s bonds being worth less than their face value, if he decides to sell prior to the maturity date?
A. If interest rates for similar bonds are higher than the interest rate Andrew’s bond is paying.
B. If interest rates for similar bonds are lower than the interest rate Andrew’s bond is paying.
C. If market interest rates are in a holding pattern - not fluctuating.
D. If there are too many stock splits and other investment alternatives in the marketplace available to investors.
Answer: A. If interest rates for similar bonds are higher than the interest rate Andrew’s bond is paying.
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