Which Answer Is FALSE Regarding Bond Prices and Interest Rates

question 36

Multiple Choice

Which answer is FALSE regarding bond prices and interest rates?

• A) Bond prices and interest rates move in opposite directions.
• B) The price of a bond is the present value of the coupon payments and the face value.
• C) The prices of short-term bonds display greater price sensitivity to interest rate changes than do the prices of long-term bonds.
• D) Interest rate risk can be described as the risk that changes in market interest rates will cause fluctuations in the bond's price.

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Definitions:

Unit of X

A standard measure or quantity of something, used as a means of expressing or describing the amount.

Increase in Price

A situation where the cost of goods or services rises, affecting the supply and demand equilibrium.

Decrease in Price

A reduction in the amount of money required to purchase a good or service.

Price of X

Represents the amount of money required to purchase a specific quantity of product X.