As the ytm of a bond rises, which of the following is most valid?
A) The bond price rises, slowly at low ytm, then more rapidly at higher ytm.
B) The bond price falls, slowly at low ytm, then more rapidly at higher ytm..
C) The bond price rises, rapidly at low ytm, then more slowly at higher ytm.
D) The bond price falls, rapidly at low ytm, then more slowly at higher ytm.

Question

As the ytm of a bond rises, which of the following is most valid? 
A) The bond price rises, slowly at low ytm, then more rapidly at higher ytm.
B) The bond price falls, slowly at low ytm, then more rapidly at higher ytm..
C) The bond price rises, rapidly at low ytm, then more slowly at higher ytm.
D) The bond price falls, rapidly at low ytm, then more slowly at higher ytm.

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond and its price are inversely related. As the YTM increases, the bond price decreases. This decrease is more rapid at lower YTMs due to the convexity of the bond price-yield relationship, and it slows down as the YTM continues to rise.

As the Ytm of a Bond Rises, Which of the Following