The basic relationship in bond valuation is for a given percentage point change in the required rate of return, the ____ the time to maturity, the ____ the change in value.
A) shorter; greater
B) longer; smaller
C) longer; greater
D) shorter; smaller

Question

Quizplus · Accepted Answer

For bonds, the longer the time to maturity, the greater the sensitivity of the bond's price to changes in interest rates, meaning a given change in the required rate of return will result in a larger change in value.

The Basic Relationship in Bond Valuation Is for a Given