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Question 12: An investor Joy desires to invest in bonds that have a current market price of $970.97 with a yield of 6%. With this information he wants to understand how the market price will change that is it will increase or decrease if the yield of the bond increases or decreases. For this, he asked his friend and his friend advised him that as per the price-yield curve relationship, if the yield decreases the market price will also decrease and vice versa. With the help of the given information identify the given options and decide whether the advice given by a friend of Joy is correct or not? Choose an answer A: Yes, the advice given by his friend is correct because as per the price yield curve the yield and market price are directly proportional to each other as when yield decreases then the market price will also decrease. B: No, the advice given by his friend is wrong as there will be no change in market price if the yield decreases but it will change only if yield increases. C: No, the advice given by his friend is wrong as there is no relationship between the market price and the yield of a bond. D: No, the advice given by his friend is wrong because as per the price yield curve the yield and market price are inversely proportional to each other that is if yield decreases then the price will increase

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