Which of the following statements is FALSE?
A)Prices of bonds with lower durations are more sensitive to interest rate changes.
B)When a bond is trading at a discount,the price increase between coupons will exceed the drop when a coupon is paid,so the bond's price will rise and its discount will decline as time passes.
C)Coupon bonds may trade at a discount,at a premium,or at par.
D)The sensitivity of a bond's price changes in interest rates is the bond's duration.

Question

Quizplus · Accepted Answer

Statement A is false because it inaccurately describes the relationship between bond duration and interest rate sensitivity. In reality, prices of bonds with higher durations are more sensitive to interest rate changes, not lower durations. Duration measures the sensitivity of a bond's price to changes in interest rates, with longer duration bonds being more affected by interest rate movements.

Which of the Following Statements Is FALSE