The market value of long-term bonds is ____ sensitive to interest rate movements; as interest rates fall, the market value of long-term bonds ____.

Question

Quizplus · Accepted Answer

Long-term bonds are very sensitive to interest rate movements because their future cash flows are discounted back over a longer period. When interest rates fall, the present value of these future cash flows increases, leading to a rise in the market value of long-term bonds.

The Market Value of Long-Term Bonds Is ____ Sensitive to Interest