Because short-term interest rates are much more volatile than long-term rates, an investor would, in the real world, be subject to much more interest rate price risk if he or she purchased a 30-day bond than if he or she bought a 30-year bond.
Answer the following statement true (T) or false (F)
False
The longer the maturity of a bond, the more significantly its price changes in response to a given change in interest rates. Thus, if two bonds have exactly the same risk of default, the bond with the longer maturity typically is exposed to more price risk from a change in interest rates. See 6-5: Interest Rates and Bond Values
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