A $1,000 bond was issued five years ago with an 8% coupon. If interest rates fall for comparable bonds, you would expect the fair market value of the bond to:

When interest rates fall for comparable bonds, the fair market value of existing bonds typically increases, particularly those with higher coupon rates. In this case, the bond you have was issued with an 8% coupon rate. If new bonds are being issued at a lower interest rate, the fixed 8% payments of your bond become more attractive compared to the new lower-yielding bonds.

As a result, investors are willing to pay a premium for your bond, as it offers higher returns through its coupon payments than what they could receive from newly issued bonds. The relationship between interest rates and bond prices is inversely proportional; when interest rates decline, the prices of existing bonds usually rise because the fixed-rate payments they provide are more valuable in comparison to new issues that are offering lower returns. Therefore, it is reasonable to conclude that the fair market value of your bond would increase under these circumstances.