(Solution) - The values of outstanding bonds change whenever the going rate -(2025 Original AI-Free Solution)

Paper Details

The values of outstanding bonds change whenever the going rate of interest changes. In general, short-term interest rates are more volatile than long-term interest rates. Therefore, short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is that statement true or false? Explain. (Hint: Make up a ?reasonable? example based on a 1-year and a 20-year bond to help answer the question.)