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    How interest rates affect long and short term bond prices

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    "The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rages are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices" Is this statement true or false? Please explain based on a 1 year and a 20 year bond.

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    https://brainmass.com/economics/macroeconomics/interest-rates-affect-long-short-term-bond-prices-167916

    Solution Preview

    This is a false statement. Prices of long-term bonds are in fact more sensitive to interest rate changes than prices of short-term bonds. As maturity increases, price sensitivity to yield tends to ...

    Solution Summary

    The relationship between long and short term bond prices and interest rate fluctuations.

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