Question $1$ of $7$

Suppose that CAT Inc. is currently selling zero$-$coupon bonds, also called discount bonds, paying the bond owner $$1,000$ at the

Suppose the interest rate increases by $1\%.$ What is the new price of this bond? Round to the nearest penny.

Select the answer that best characterizes the relationship between the price of a bond and interest rate movements.

Interest rates and bond prices move in the same direction.

Interest rates and bond prices move in opposite directions.