Which of the following theorem explains the relationship between interest rates
ID: 2725527 • Letter: W
Question
Which of the following theorem explains the relationship between interest rates and bond prices? For a given change in interest rates, the prices of higher-coupon bonds will change more drastically than the prices of lower-coupon bonds. For a given change in interest rates, the prices of long-term bonds will change more drastically than the prices of short-term bonds. Bond prices are directly related to interest rate movements. For a given change in interest rates, the prices of short-term bonds will change more drastically than the prices of long-term bonds.Explanation / Answer
For a given change in interest rates, the prices of short-term bonds will change more drastically than the prices of long-term bonds.