The concave shape of the bond price-yield curve shows:
I.For a given change in interest rates, bond prices will increase more when rates decrease than they will decrease when rates increase.
II.The curve is steeper for higher interest rates.
III.The curve is always downward sloping.

Question

Quizplus · Accepted Answer

Statement I is correct as the concave shape of the curve implies that the percentage increase in price for a given decrease in interest rates will be greater than the percentage decrease in price for an equal increase in interest rates.
Statement II is incorrect as the curve is actually flatter for higher interest rates and steeper for lower interest rates.
Statement III is correct as the bond price-yield curve is always downward sloping to reflect the inverse relationship between bond prices and yields.

The Concave Shape of the Bond Price-Yield Curve Shows