A long-term bond's price is less affected by interest rate movements than a short-term bond's price.

Question

Quizplus · Accepted Answer

This statement is false. Long-term bonds are actually more sensitive to interest rate movements than short-term bonds. This is because long-term bonds have a higher duration, which measures the sensitivity of a bond's price to changes in interest rates. As a result, small changes in interest rates can lead to larger changes in the price of a long-term bond.

A Long-Term Bond's Price Is Less Affected by Interest Rate