For small change in interest rates,market prices of bonds are inversely proportional to their
A)equity.
B)asset value.
C)liability value.
D)duration value.

Question

Quizplus · Accepted Answer

The market prices of bonds are impacted by the change in interest rates as they affect the present value of the future cash flows. Duration measures the sensitivity of bond prices to changes in interest rates. Therefore, for small changes in interest rates, the market prices of bonds are inversely proportional to their duration value.

For Small Change in Interest Rates,market Prices of Bonds Are