“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Question

Want to see more full solutions like this?

Answer 1

Textbook Question

Chapter 4, Problem 2Q

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

How to rewrite the problem statement, correcting the identified errors of the Business Problem Information and the current Bank Problem Statement (for the discussion: Evaluating a Problem Statement)

Don't used hand raiting and don't used Ai solution

3 years ago, you invested $9,200. In 3 years, you expect to have $14,167. If you expect to earn the same annual return after 3 years from today as the annual return implied from the past and expected values given in the problem, then in how many years from today do you expect to have $28,798?

Answer 2

Textbook Question

Chapter 4, Problem 2Q

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 4, Problem 2Q

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 4, Problem 2Q

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Answer 8

Expert Solution & Answer

Summary Introduction

To discuss: Whether the given statement is true or false.

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Summary Introduction

To discuss: Whether the given statement is true or false.

Answer 12

Explanation of Solution

The prices of short term bond are less sensitive when compared with the prices of long-term bond to the changes in the rate of interest as the funds invested in the short-term bonds could be reinvested at a new rate of interest faster than the funds that are tied up in the long-term bonds.

Hence, the statement is false.

Answer 13

Ch. 4 - Short-term interest rates are more volatile than...Ch. 4 - The rate of return on a bond held to its maturity...Ch. 4 - If you buy a callable bond and interest rates...Ch. 4 - A sinking fund can be set up in one of two ways....Ch. 4 - Prob. 1P Ch. 4 - Prob. 2P Ch. 4 - Current Yield for Annual Payments Heath Food...Ch. 4 - Determinant of Interest Rates The real risk-free...Ch. 4 - Default Risk Premium A Treasury bond that matures...Ch. 4 - Prob. 6P

“Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices.” Is this statement true or false? Explain.

Videos

Explanation of Solution

Want to see more full solutions like this?

Chapter 4 Solutions