Which of the Following Are True About the Interest-Rate Sensitivity

question 16

Multiple Choice

Which of the following are true about the interest-rate sensitivity of bonds
I. Bond prices and yields are inversely related.
II. Prices of long-term bonds tend to be more sensitive to interest-rate changes than prices of short-term bonds.
III. Interest-rate risk is directly related to the bond's coupon rate.
IV. The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.

• A)I and II
• B)I and III
• C)I, II, and IV
• D)II, III, and IV
• E)I, II, III, and IV

---

Definitions:

Bias Avoidance

Efforts to recognize, reduce, and remove personal and systemic biases in decision-making processes or information presentation.

Fiscal Year

A twelve-month period used for accounting purposes and preparing financial statements, which may or may not align with the calendar year.

Capital Equipment

Large, long-term investments in goods or machinery used by a business to produce goods or services.

Sentence Length

The number of words or characters constituting a sentence, influencing readability and style in written communication.