. Which, if any, of the following statements are false? A. Market interest rates

Question

.  Which, if any, of the following statements are false?

A.  Market interest rates and bond prices vary directly.

B.  For a given absolute change in interest rates from the same base level, the proportionate increase in bond prices when rates fall is larger than the proportionate decrease in bond prices when rates rise.

C.  For identical coupon rates and a given absolute change in interest rates from the same base level, long-term bonds change proportionately less in price than short-term bonds.

D.  For identical maturities and a given absolute change in interest rates from the same base level, low-coupon bonds change proportionately less in price than high-coupon bonds.

Explanation / Answer

1)

Market interest rates and bond prices vary directly - FALSE

REASON:

Bond prices and interest rates are inversely related; that is, they tend to move in the opposite direction from one another.

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