Question

Which one of the following statements is NOT true?
A) Interest rate changes and bond prices are inversely related.
B) Interest rate risk is the risk that bond prices will change as interest rates change.
C) As interest rates increase, bond prices increase.
D) Long-term bonds are more price volatile than short-term bonds of similar risk.

Answer 1

One of the following statements is FALSE: Long-term bonds have more price volatility than short-term bonds with comparable risk. because the prices of bonds and interest rates are inversely correlated.

The danger of interest rates is greater for long-term bonds than for Long-term  bonds. Additionally, these investments can be made by investors who are ok with the market's shifting interest rates. For investors wanting security and a fixed rate of interest paid semi-annually until the bond's maturity date, Treasury bonds can be an excellent investment. Bonds play a significant role in the asset allocation of an investment portfolio since their interest rate return serves to balance out the volatility of equities prices.

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