Which of the following statements regarding bonds is false?
A) Longer maturities investors to greater interest rate risk.
B) Longer maturities have greater price fluctuations than short term maturities.
C) Shorter maturities are more liquid than longer maturities.
D) Longer maturities have a less chance for larger gains when interest rates decrease.

Question

Quizplus · Accepted Answer

Longer maturities actually have a greater chance for larger gains when interest rates decrease because their prices are more sensitive to changes in interest rates. When rates fall, the prices of longer-term bonds typically increase more than those of shorter-term bonds.

Which of the Following Statements Regarding Bonds Is False