Answered: Price of short-term bond are less…

Price of short-term bond are less volatile than long-term bonds. But yield to maturity of long-term bonds are less volatile than short-term bonds. How do you reconcile these observations?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 2Q: Short-term interest rates are more volatile than long-term interest rates, so short-term bond prices...

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Price of short-term bond are less volatile than long-term bonds. But yield to maturity of long-term bonds are less volatile than short-term bonds. How do you reconcile these observations?

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Prices of long-term bonds are more volatile than prices of short-term bonds. However, yields to maturity of short-term bonds fluctuate more than yields of long-term bonds. How do you reconcile these two empirical observations?
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