Valuation and Factors Affecting Prices of Bonds

Question

Which, if any, of the following statements are false?

  1. For a given coupon rate, the sensitivity of bond prices to changes in interest rates increases at an increasing rate as maturity increases.
  2. For a given absolute change in interest rates from the same base level, the proportionate increase in bond prices when rates fall is larger than the proportionate decrease in bond prices when rates rise.
  1. For identical coupon rates and a given absolute change in interest rates from the same base level, long-term bonds change proportionately more in price than short-term bonds.
  2. For identical maturities and a given absolute change in interest rates from the same base level, low-coupon bonds change proportionately less in price than high-coupon bonds.

Summary

This question belongs to finance and discusses about various aspects of bonds.

Total word count: 16

 

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