Which of the following is false?
A) As interest rates rise, bond prices rise, everything else the same.
B) Given an absolute change in interest rates, the percentage increase in a bond's price will be greater than the percentage decrease, everything else the same.
C) Long-term bonds change proportionately more in price than short-term bonds for a given rate change, everything else the same.
D) A bond with a lower coupon will change more in price than a bond with a higher coupon, everything else the same.
E) A bond's duration is a measure of its price elasticity.

Question

Quizplus · Accepted Answer

As interest rates rise, bond prices actually fall. This is because newer bonds will have higher coupon rates, making them more attractive to investors than older bonds with lower coupon rates. Therefore, to sell older bonds, their prices must decrease to make them more attractive to investors.

Which of the Following Is False