Under competitive assets market condition, the price of a bond must always be______________ to its present value in equilibrium. 

Correct option is C

• Under competitive assets market conditions, the price of a bond must always be equal to its present value in equilibrium.
• This concept stems from the idea that in an efficient market, the price of a bond is determined by the present value of its future cash flows (interest payments and principal repayment) discounted at the appropriate rate of return.
• In equilibrium, the price reflects the present value of these future payments.

Additional Information:

• The present value of a bond is calculated by discounting its future cash flows (coupons and face value) back to the present using the required rate of return (discount rate).
• Equilibrium price is where the market price of the bond equals its present value, ensuring that there is no incentive for arbitrage or further price changes.