Which of the following are generally true of all bonds?
A) The longer a bond's maturity, the lower 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 long-term bonds are more volatile than those for shorter-term bonds.
D) All of the above are true.
E) Only A and B of the above are true.

Question

Quizplus · Accepted Answer

All the statements provided are generally true regarding bonds. Longer maturity bonds are more sensitive to interest rate changes, leading to potentially lower returns if rates rise (A). Bond returns can indeed turn negative with rising interest rates, regardless of initial high interest rates (B). Long-term bonds are more volatile in terms of prices and returns compared to short-term bonds due to their longer exposure to interest rate risks (C).

Which of the Following Are Generally True of All Bonds