2025 CFA Level I Exam: CFA Study Preparation

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Bond price sensitivity ______ at a(an) ______ rate as maturity increases.

A. increases; increasing
B. increases; decreasing
C. decreases; decreasing

User	Comment
tanyak	why does it increase at a decreasing rate??
Masterkang	Obviously the increase of the maturity from 1 year to 2 years has a bigger impact then then increase from 29 to 30 years.
omer123	tanyak at longer maturities the change in price due to interest rate volatility will be smaller due to positive convexity and large at smaller maturities.
euniceyew	can anyone explain further y it increase at a decreasing rate..i still dun get the explanation..thanks
bhaynes	euniceyew - just can think about it on a percetage basis. If you increase a maturity for 1yr to 2yr, you doubled it. Where if you increase 19yr to 20yr, it's only about a 5% increase. While both increase, the latter increases by a smaller amount comparatively speaking.
harpalani	Thanks bhaynes! That's convincing.
johntan1979	Or you can make up an example: 8% coupon, 2 years, yield 9% PV = 98.21 8% coupon, 3 years, yield 9% PV = 97.42 Percentage change = -0.7995% 8% coupon, 10 years, yield 9% PV = 93.50 8% coupon, 11 years, yield 9% PV = 93.11 Percentage change = -0.4153% See the decreasing rate?
assiduous	I like bhaynes' explanation. This concept can also be observed just by watching how the yields react to monetary policy.
Inaganti6	Bhaynes DORLING LOVELY
khalifa92	long-term bonds price volatility is greater than short-term bonds.

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Learning Outcome Statements

identify the relationships among a bond's price, coupon rate, maturity, and yield-to-maturity

CFA® 2025 Level I Curriculum, Volume 4, Module 6.