Prices and returns for ________ bonds are more volatile than those for ________ bonds.
A) long-term; long-term
B) long-term; short-term
C) short-term; long-term
D) short-term; short-term

Question

Quizplus · Accepted Answer

Long-term bonds are typically riskier and more sensitive to changes in interest rates, which leads to higher price volatility and higher return volatility. Short-term bonds, on the other hand, are usually more stable and less sensitive to interest rate changes. Therefore, the price and return volatility of long-term bonds are greater than those of short-term bonds.

Prices and Returns for ________ Bonds Are More Volatile Than