When interest rates being paid on new bonds are higher but the interest payments on an existing bond remain fixed, the only way for the existing bond to compete is for its price to go

The bond has to go down.

Step-by-step explanation: A bond is a loan usually given by an issuer to an investor that pays back a fixed rate of return.

Although bonds have a fixed rate of return, bonds itself are not fixed which means when bond price can rise or fall. When bond rises, interest falls and when bond price falls, interest rises. A vice versa relationship.

What this means is that the investor has to pay more, take for example.

-If a bond of $100 has a return rate of 10%, this means investor will pay back $10.

-If bond price increases $120, investor will have to pay $12. Investor pays more

-However, if bond price decreases to $80, investor will pay $8. Investor pays less

Therefore, for an existing bond to compete with a new bond which has a higher interest rate, the existing bond price has to go down so that interest can go up.

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