The discussion of supply and demand in Chapter 3 noted that, if two goods are substitutes for each other, the price of one and the demand for the other are directly related.

For example, if Pepsi and Coca-Cola are substitutes, an increase in the price of Pepsi will increase the demand for Coca-Cola. Suppose that bonds and stocks are substitutes for each other. We know that interest rates and bond prices are inversely related. What do you predict is the relationship between stock prices and interest rates? Explain your answer.