A pricing theorem for the bond market states that a decrease in a bond's yield will raise the bond's ___ by an amount that is greater in size than the corresponding fall in the bond's price that would occur if there were an equal-sized increase in the bond's yield

Question

Quizplus · Accepted Answer

The theorem states that as the bond's yield decreases, its price will increase. However, the increase in price will be more significant than the decrease in price that would occur if there was an equal increase in the bond's yield. This is because the price of a bond is more sensitive to changes in yield when yields are low.

A Pricing Theorem for the Bond Market States That a Decrease