Question: When market rates of interest rise after a fixed rate security
When market rates of interest rise after a fixed-rate security is purchased, the value of the now-below-market, fixed-interest payments declines, so the market value of the investment falls. On the other hand, if market rates of interest fall after a fixed-rate security is purchased, the fixed-interest payments become relatively attractive, and the market value of the investment rises. Assuming these price changes are not viewed as giving rise to another-than-temporary impairment, how are they reflected in the investment account for a security classified as held-to-maturity?
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