Question
In: Finance
Determine whether the below statements are true or false. I. Prices and returns for shortterm bonds...
Determine whether the below statements are true or false. I.
Prices and returns for shortterm bonds are less volatile than those
for long-term bonds. II. The prices of longer-maturity
bonds respond more dramatically to changes in interest
rates.
(a) I is true, II false.
(b) Both are false.
(c) Both are true.
(d) I is false, II true.
justify answer
Solutions
Expert Solution
General Rule: Higher the Duration, More the Sensitivity to Interest rate Change
Accordingly, It can be said that LONGER PERIOD BONDS are MORE VOLATILE
Therefore, Both are True
jeff jeffy answered 2 years agoRelated Solutions
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