For a specific change in the yield to maturity Athe shorter

For a specific change in the yield to maturity

A.the shorter the time until a bond matures, the greater will be the change in its price.

B.the longer the time until a bond matures, the greater will be the change in its price.

Cthe longer the time until a bond matures, the greater will be the change in its par value.

D.the shorter the time until a bond matures, the greater will be the change in its coupon rate.

Solution

Correct option is > B) the longer the time until a bond matures, the greater will be the change in its price.

Long duration bonds are more sensitive because of largest cash flow i.e. Face Value or Principal receipt is placed at end of maturity hence discounting factor has very high impact of price.