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 choices are correct.

Question

Quizplus · Accepted Answer

Bonds with short-term maturities will have very little interest rate risk because their cash flows will be received and reinvested in a short period of time, making them less sensitive to changes in interest rates. Bonds with large coupon payments and higher credit ratings may still have interest rate risk, albeit to a lesser degree, as the market value of these bonds can still be impacted by changes in interest rates.

Which of the Following Statements Is Correct