A rise in interest rates will cause short-term bond prices to
A) fall less than long-term bond prices.
B) fall more than long-term bond prices.
C) rise more than long-term bond prices.
D) rise less than long-term bond prices.

Question

Quizplus · Accepted Answer

Bond prices and interest rates have an inverse relationship. Long-term bonds are more sensitive to interest rate changes than short-term bonds, so when interest rates rise, long-term bond prices fall more significantly than short-term bond prices.

A Rise in Interest Rates Will Cause Short-Term Bond Prices