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True/False question: Interest Rates and Long-Term Bonds

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Most correct true statement

1. All else =, an increase in interest rates will have a greater effect on the prices of long term bonds than it will on the prices of short term bonds

2. All else =, an increase in interest rates will have a greater effect on higher coupon bonds

3 An increase in interest rates will have a greater effect on a zero-coupon band with 10 hears maturity than it will have on a 9-year bond with a 10% annual coupon.

4. All are correct

5. 1 & 3 are correct.

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Solution Summary

The interest rates and long-term bonds are examined. The greater effects on higher coupon bonds are determined. You will find the answer to this puzzling question inside.

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