Which of the following observations is NOT true?
A)Variance of bond prices is nonconstant over time.
B)Variance of bond prices rises at first and then falls as the bond approaches maturity.
C)As the bond approaches maturity, all price paths must lead to 100 percent of the face value of the bond.
D)As the bond approaches maturity, all price paths must lead to the principal paid by the issuer on maturity.
E)Variance of a bond's price or return increases as maturity approaches.

Question

Quizplus · Accepted Answer

As a bond approaches maturity, its price becomes more predictable and less volatile, leading to a decrease in variance, not an increase.

Which of the Following Observations Is NOT True