If a decrease in interest rates is akin to a rising tide that lifts all boats in the harbor, which of the following best represents the effect on bond prices? A: Bond prices rise :: B: Bond prices fall :: C: Bond prices remain unchanged :: D: Bond prices fluctuate without a clear trend

When interest rates decrease, bond prices generally rise. This happens because existing bonds with higher interest rates become more valuable compared to new bonds issued at the lower rates. For example, if you have a bond that pays 5% interest and new bonds are only paying 3%, your bond is more attractive, so its price increases. This relationship is similar to how a rising tide lifts all boats; when rates fall, the overall value of bonds goes up. Therefore, the correct answer is A: Bond prices rise.