Which of the following statements is false?   A.   Other things being equal, an increase in a bond’s maturity will increase its interest rate risk.   B.   Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk.   C.   Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk.   D.   Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.

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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Which of the following statements is false?

 

A.

 

Other things being equal, an increase in a bond’s maturity will increase its interest rate risk.

 

B.

 

Other things being equal, an increase in the coupon rate of a bond will decrease its interest rate risk.

 

C.

 

Other things being equal, an increase in a bond’s YTM will decrease its interest rate risk.

 

D.

 

Effective duration is calculated as Macaulay duration divided by one plus the bond’s yield to maturity.

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