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Corporate Finance

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Key Factors affecting Bond Values

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Which of the following statements is FALSE?

A

As interest rate and bond yields fall, bond prices will rise.

B

The shorter the maturity of a bond, the less sensitive it is to interest rates changes.

C

The higher the coupon rate offered by a bond, the more sensitive it is to interest rate changes.

D

Bond prices converge to the bonds face value due to the time effect, but simultaneously move up and down due to unpredictable changes in bond yields.