Which of the following statements is correct?
A)Bonds with short-term maturities will have very little interest rate risk.
B)Bonds with large coupon payments will have very little interest rate risk.
C)Bonds with higher credit ratings will have very little interest rate risk.
D)All of these statements are correct.

Question

Quizplus · Accepted Answer

Bonds with short-term maturities will have very little interest rate risk because they have a quicker return of principal, which means the bondholders are not exposed to as much interest rate risk as they would be with longer-term bonds.

Bonds with large coupon payments and higher credit ratings can still have interest rate risk, depending on their maturity dates and the prevailing interest rates in the market. Therefore, statements B and C are incorrect.

Which of the Following Statements Is Correct