Which of the following are false about the interest-rate sensitivity of bonds? I) Bond prices and yields are inversely related.
II) Prices of long-term bonds tend to be more sensitive to interest-rate changes than prices of short-term bonds.
III) Interest-rate risk is correlated with the bond's coupon rate.
IV) The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.

Question

Quizplus · Accepted Answer

I) This statement is true, not false. Bond prices and yields have an inverse relationship.
II) This statement is true. Longer-term bonds have greater price sensitivity to changes in interest rates.
III) This statement is false. Coupon rate is not directly correlated with interest-rate risk.
IV) This statement is generally true. The greater the yield to maturity, the less sensitive the bond's price is to changes in yield.

Which of the Following Are False About the Interest-Rate Sensitivity