Bond prices are impacted by both the direction and magnitude of interest rate changes.

Question

Quizplus · Accepted Answer

Bond prices have an inverse relationship with interest rates - when interest rates increase, bond prices decrease, and vice versa. The magnitude of the interest rate change also affects bond prices in that larger changes in interest rates will typically result in larger changes in bond prices. So, both the direction and magnitude of interest rate changes can impact bond prices.

Bond Prices Are Impacted by Both the Direction and Magnitude