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

Bonds with lower durations are less sensitive to interest rate changes, not more sensitive. Duration measures the sensitivity of a bond's price to changes in interest rates, with higher duration indicating greater sensitivity.

Which of the Following Statements Is False