Which of the following are generally TRUE of all bonds?
A)The longer a bond's maturity,the greater is the rate of return that occurs as a result of the increase in the interest rate.
B)Even though a bond has a substantial initial interest rate,its return can turn out to be negative if interest rates rise.
C)Prices and returns for short-term bonds are more volatile than those for longer term bonds.
D)A fall in interest rates results in capital losses for bonds whose terms to maturity are longer than the holding period.

Question

Quizplus · Accepted Answer

Bond prices and interest rates have an inverse relationship; when interest rates rise, bond prices fall. This means that even if a bond initially has a high interest rate, if interest rates increase over time, the bond's return may become negative.

Note: the other options are not generally true of all bonds.

Which of the Following Are Generally TRUE of All Bonds