Which of the following statements about the relationship between interest rates and bond prices is true?
I.There is an inverse relationship between bond prices and interest rates.
II.There is a direct relationship between bond prices and interest rates.
III.The price of short-term bonds fluctuates more than the price of long-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
IV.The price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates (assuming that the coupon rate is the same for both).
A)I and IV only
B)I and III only
C)II and III only
D)II and IV only

Question

Quizplus · Accepted Answer

There is an inverse relationship between bond prices and interest rates (I). Long-term bonds are more sensitive to interest rate changes than short-term bonds, causing their prices to fluctuate more (IV).

Which of the Following Statements About the Relationship Between Interest