Prices and returns for ________ bonds are more volatile than those for ________ bonds,everything else held constant.
A)long-term;long-term
B)long-term;short-term
C)short-term;long-term
D)short-term;short-term

Question

Quizplus · Accepted Answer

Long-term bonds have a higher duration and are more sensitive to changes in interest rates, which leads to higher volatility in prices and returns. Short-term bonds have a lower duration and are less sensitive to changes in interest rates, resulting in lower volatility in prices and returns. Therefore, the prices and returns for long-term bonds are more volatile than those for short-term bonds, everything else held constant.

Prices and Returns for ________ Bonds Are More Volatile Than