Which of the Following Statements About the Relationship Between Interest

question 48

Multiple Choice

Which of the following statements about the relationship between interest rates and bond prices is true?
I. There is an inverse relationship between bond prices and interest rates. II) There is a direct relationship between bond prices and interest rates.
III. The price of short-term bonds fluctuates more than the price of long-term bonds for a given change in interest rates. (Assuming that coupon rate is the same for both)
IV. The price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates. (Assuming that the coupon rate is the same for both)

• A) I and IV only
• B) I and III only
• C) II and III only
• D) None of the given statements are true

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Definitions:

Six-Sided Die

A cube-shaped object with each of its six faces displaying a different number of dots from one to six, used in games to generate random numbers.

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A piece in the game of chess representing infantry, known for its initial double move option and en passant capture rule.

Chess Set

A collection of game pieces and a board used to play chess, a strategic board game.

Probability Calculus

A branch of mathematics that deals with calculating the probabilities of complex events.