Short-term bond prices are more sensitive to interest rate

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Reference no: EM13806660

1. Short term interest rates are more volatile than long-term interest rates, so short-term bond prices are more sensitive to interest rate changes than are long-term bond prices. Is this statement true or false? Explain.

2. The rate of return on a bond held to its maturity date is called the bonds yield to maturity. If interest rates in the economy rise after a bond have been issued, what will happen to the bond’s price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond’s price? Why or why not?

3. A sinking fund can be set up in one of two ways. Discuss the advantages and disadvantages of each procedure from the viewpoint of both the firm and its bondholders

Reference no: EM13806660

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