Question

4. Which of the following statements about the relationship between interest rates and bond prices is true?

I. There is an inverse relationship between bond prices and interest rates
II. There is a direct relationship between bond prices and interest rates
III. The price of short-term bonds fluctuates more than the price of long-term bonds for a given change in interest rates. (Assuming that coupon rate is the same for both)
IV. The price of long-term bonds fluctuates more than the price of short-term bonds for a given change in interest rates. (Assuming that the coupon rate is the same for both)

Answer 1

1 is correct .

Step-by-step explanation:

when the cost of borrowing money rises bond price usually fall and vice versa.