Maturity risk exists because the prices of longer term bonds fluctuates more in response to interest rate changes than the prices of shorter term bonds.

Question

Quizplus · Accepted Answer

Maturity risk is the risk that the value of a bond will decrease if interest rates rise. This risk is greater for longer term bonds because they have more years for interest rates to change and thus their prices are more sensitive to interest rate fluctuations than shorter term bonds.

Maturity Risk Exists Because the Prices of Longer Term Bonds