9-54 For small change in interest rates,market prices of bonds move in an inversely proportional manner according to the size of the

Question

Quizplus · Accepted Answer

The correct term that describes the sensitivity of a bond's price to changes in interest rates is duration. Duration takes into account the time to maturity, coupon rate, and yield to maturity of the bond. A small change in interest rates can have a significant impact on the price of a bond with a high duration value. Therefore, the correct choice is D. Choices A and B are incorrect because neither equity nor asset value determines a bond's price sensitivity to interest rate changes. Choice C is incorrect because liability value refers to the amount owed, and not the price of bonds.

9-54 for Small Change in Interest Rates,market Prices of Bonds