The graph relating bonds' yield-to-maturity to price is

Question

Quizplus · Accepted Answer

The relationship between yield-to-maturity and price is generally depicted as a convex curve. As interest rates rise, bond prices will fall, and the opposite occurs as interest rates decrease. However, the rate at which bond prices change in response to interest rate fluctuations is not linear; instead, it curves downward, resulting in a convex shape. This is because as yield-to-maturity decreases or increases, the bond price changes by a progressively smaller amount, resulting in a diminishing rate of change.

The Graph Relating Bonds' Yield-To-Maturity to Price Is