Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)? I. Longer-term bonds have more interest rate risk than shorter-term bonds. II. Shorter-term bonds have more interest rate risk than longer-term bonds. III. Longer-term bonds have more reinvestment rate risk than shorter-term bonds.

Why does the longer-term (15-year) bond fluctuate more when interest rates change than does the shorter-term bond (1 year)? I. Longer-term bonds have more interest rate risk than shorter-term bonds. II. Shorter-term bonds have more interest rate risk than longer-term bonds. III. Longer-term bonds have more reinvestment rate risk than shorter-term bonds.

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 3Q: The rate of return on a bond held to its maturity date is called the bonds yield to maturity. If...

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