Products & Their RisksQuestion 40 of 398
Two bonds are identical except for maturity. Which bond's price will generally change MORE for a given change in interest rates?
a.The bond closest to maturity
b.Both change equally
c.The one with the higher credit rating
d.The bond with the longer maturity
Explanation
Longer-maturity bonds have greater interest-rate sensitivity (higher duration), so their prices move more for a given change in rates. Maturity, not credit rating, drives this effect, and the two do not move equally.
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