A drop in interest rates: a. Affects the prices of short-term securities more than long-term securities...
A drop in interest rates:
a. Affects the prices of short-term securities more than long-term securities
b. Affects the prices of long-term securities more than short-term securities
c. Affects the prices of both short-term securities and long-term securities the same way
d. None of the above
Homework Answers
Option B:
Affects the prices of long term securities more than short term securities.
Explanation : Long term securities have greater duration than short term bonds. Because of this a given interest rate change will have greater effect on long term securities.
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