All else held constant,interest rate risk will increase when the time to maturity:
A)decreases or the coupon rate increases.
B)decreases or the coupon rate decreases.
C)increases or the coupon rate increases.
D)increases or the coupon rate decreases.
E)decreases and the coupon rate equals zero.

Question

Quizplus · Accepted Answer

Interest rate risk increases when the time to maturity increases because longer-term bonds have more time for interest rates to fluctuate, affecting their prices more significantly. Additionally, when the coupon rate decreases, the bond is less attractive compared to new bonds issued at higher rates, making its price more sensitive to interest rate changes.

All Else Held Constant,interest Rate Risk Will Increase When the Time