Holding maturity constant, a decrease in rates will raise bond prices on a percentage basis more than a corresponding increase in rates will lower bond prices.

Question

Quizplus · Accepted Answer

This is due to the convexity of bonds, where the price-yield curve is convex, meaning that the price increase for a given decrease in yield is larger than the price decrease for an equivalent increase in yield.

Holding Maturity Constant, a Decrease in Rates Will Raise Bond