For a given change in required yields, short-duration securities suffer a smaller capital loss or receive a smaller capital gain than do long-duration securities.

Question

Quizplus · Accepted Answer

This is because short-duration securities have lower interest rate risk compared to long-duration securities, as they mature quickly and their cash flows are not as sensitive to changes in interest rates. Therefore, when there is a change in required yields, the impact on the price and capital gain/loss will be smaller for short-duration securities.

For a Given Change in Required Yields, Short-Duration Securities Suffer