Which of the following are generally true of all bonds?
A) The only bond whose return equals the initial yield to maturity is one whose time to maturity is the same as the holding period.
B) A rise in interest rates is associated with a fall in bond prices, resulting in capital losses on bonds whose term to maturities are longer than the holding period.
C) The longer a bond's maturity, the greater is the price change associated with a given interest rate change.
D) All of the above are true.
E) Only A and B of the above are true.

Question

Quizplus · Accepted Answer

All the statements provided are generally true regarding bonds. Statement A is correct because if a bond is held to its maturity, its return will indeed equal the initial yield to maturity, assuming no default. Statement B is accurate as bond prices and interest rates have an inverse relationship, meaning when interest rates rise, bond prices fall, which can lead to capital losses if the bond is sold before maturity. Statement C is also true because bonds with longer maturities are more sensitive to interest rate changes, leading to larger price fluctuations for a given change in interest rates.

Which of the Following Are Generally True of All Bonds