An increase in a bond's yield to maturity results in a price decline that is ________ the price increase resulting from a decrease in yield of equal magnitude.
A) greater than
B) equivalent to
C) smaller than
D) The answer cannot be determined.

Question

Quizplus · Accepted Answer

The relationship between a bond’s yield and its price is inverse, meaning that as the yield increases, the price of the bond will decrease. The degree of decrease in price resulting from a given increase in yield will typically be greater than the degree of increase in price resulting from an equal decrease in yield. Therefore, a price decline resulting from an increase in yield will be smaller than the price increase that would result from an equivalent decrease in yield.

An Increase in a Bond's Yield to Maturity Results in a Price