Two years ago, Maple Enterprises issued 4%, 20 years bonds and Temple Corp issued 4%, 10 year bonds. Since their time of issue, interest rates have increased. Which of the following statements is true of each firm's bond prices in the market, assuming they have equal risk?

Question

Quizplus · Accepted Answer

Longer-term bonds are more sensitive to interest rate changes, so Maple's 20-year bonds would decrease more in price compared to Temple's 10-year bonds when interest rates rise.

Two Years Ago, Maple Enterprises Issued 4%, 20 Years Bonds